Investment planning can seem like an arduous activity at first. Deciding on the right amount to invest, selecting the appropriate adviser, choosing instruments that suit your needs, monitoring the investments made, and re-balancing the investment portfolio. These are some of the activities you need to do to execute an investment plan.
Investment plans are crucial to creating wealth for the future. Selecting the right financial product for yourself is essential for investment planning to work. There is no one best investment plan. A functional plan is different for different people. We will look at various aspects of investment planning in this article.
Financial security is essential, and you cannot make yourself or your family financially secure via salary and savings alone; drawing up an investment plan is important. An investment plan lets your money earn money. There are several goals that you may have, aspirations that you may want to fulfill, and several life stage requirements and responsibilities that you need to undertake.
The following 5 are the primary features of investment planning:
Income generation: Investment planning should be able to generate income for you. If you’re young, income generation is not critical early in your investment plan. However, as you age, a stable income becomes an essential feature of the process.
Capital growth: Whether it is a one-time investment plan or a duration-based one like a five-year investment plan, growing capital is an essential feature. Capital growth represents actual growth in wealth which is received by an investor. This realization of growth is what investors are looking for in an investment plan.
Safety of principal: While the ability to generate income and grow capital is attractive features, a fundamental requirement of investors is that their invested capital must be protected. Aggressive investment plans have less ability to safeguard principal than more income-oriented methods.
Tax optimization: Investment panning should target those investment products which minimize or optimize the tax implications on investments: the better tax management, the more returns in the hand of investors.
Liquidity: Liquidity refers to the ability to sell and realize the value of a product when one desires. Investment planning should ensure that an investment portfolio is liquid.
There are several investment options which can be used for your best investment plan 2020 like direct equities, mutual funds (you can use systematic investment plans here), fixed and recurring deposits, postal deposit schemes, small savings schemes, gold, real estate, PPF, NPS, etc.
Those investing in fixed deposit instruments or those issued by the government are considered among the safest investment options.
Though there can be several components to a financial plan, the five which are essential are as follows:
Goals and objectives: You need to know what and how much you need to save for. Without specific goals and objectives, a financial plan cannot exist.
Financial position: You need to assess your current
financial position before an investment plan can be drawn up. Your goals can
help you reshape your financial position better. For example, if you want to
have a large retirement corpus, you need to let go of some immediate
indulgences so that you can put aside more money for short term investment
Impact of taxes: Your income determines the impact of taxes. This will help a financial planner choose those investments which reduce your tax outgo, thereby increasing your wealth.
Milestone planning: There are certain milestones in your life, like buying a car or house, paying for your child education plan, getting them married, among others, which may be beyond goals and objectives. The best one-time investment plan needs to account for these.
Plan of action: Once an investment plan is drawn up, you need to know how it will be put to work. This means delineating responsibility to individuals from those responsible for drawing up the plan, maintaining accounts, checking for legal aspects (for estate planning), monitoring and re-balancing the investment portfolio.
· Tip 1: Assess your financial situation
· Tip 2: Set realistic goals for your investment plan
· Tip 3: Create a timeline to achieve your goals
· Tip 4: Calculate how much you need to save each month to achieve your goals
· Tip 5: Profile your risk handling ability
· Tip 6: Choose appropriate investment options
· Tip 7: Monitor the progress of your investments