Investment Planning is the process of placing your money or funds into proper investment vehicles based on your financial goals and the time frame to achieve them. How much risk you can afford to take is also an important point here.Investment Planning Click To Tweet
Investment Planning Process
- Identify your goal – These goals can be buying a house, planning for kid’s higher education etc. You can sort them as High, Medium and Low priority goals.
- Analyze how much risk you can afford – You are the people who to decide yourself on how much risk that you can take on your investments. There are certain psychometric tests which can be used to measure your risk taking capacity. The risk profiles can be Aggressive, Medium and Conservative.
- Identify time frame for your goals – You can divide the goals based on the duration as Short, Medium and Long term goals.
- Identify financial products – Now based on the above points, identify the financial products which match your requirements.
For the Investment Planning, the important points are :
- Dynamic process – Investment planning and Financial planning is a continuous process. This is not a one time event. Your goals and economic profile may keep changing. Accordingly, hold your investments.
- Realistic – Try to set the goal amounts in a realistic way. Consider various factors like your future income growth, job stability, savings rate etc. The goals should be attainable.
- Taxation – While identifying investment products, you may check if they are tax efficient or not, but do not buy them just to save taxes. If they meet your requirements, you only consider to buy them. Also, find out the tax adjusted returns for each product.
- Re-balancing – Not only your priorities change over a period of time but also the financial market conditions. Tweak your investment portfolios as per the changing conditions.
- Tracking & Monitoring – Maintain a portfolio tracker to stay up to date on your investments’ performance.
- Diversification – Identify investments across the asset classes. Spread your risk. Do not invest in one product category only.