Investment Planning – How to Create a Sound Investment Plan?

Investment Planning is one of the important aspects of Financial Planning. The probability of achieving your financial goals depends on how well you plan your investments.

What is Investment Planning?

Investment Planning is the process of placing your monies/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.

We normally give more importance to RETURNS than goals. Example – You get a bonus of Rs 1 Lakh then the first question which may come to mind is – ” Can I get 10% returns if this 1 lakh is invested in XYZ product?”

Rather it should be ‘for which goal should I invest this Rs 1 Lakh?’

Investment Planning Process:

So, how should I plan the investments? Is there a better approach?

  • Identify your Financial Goals: 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’re the best judge for yourself to decide on how much risk 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.

Investment planning – Important points to ponder upon:

  • 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, accommodate 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. Consider buying them only if they meet your requirements. Also, find out the tax adjusted returns for each product.
  • Re-balancing & Re-allocation – 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. (You may create a portfolio tracker on
  • Diversification – Identify investments across the asset classes. Spread your risk. Do not invest in one product category only.

I believe that many of us chase only the returns and unnecessarily complicate the financial lives. Do not just chase returns but chase your Goals too.

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