How it works to make better financial life…

What is investment planning?

Investment planning is the process of identifying financial goals and

converting them through building a plan. Investment planning is the main
component of financial planning. The investment planning begins with
identification of goals and objectives. Then we need to match those goals with
our available financial resources. Nowadays there are many investment
vehicles to invest in, most common being cash, equities, bonds and property.
So according to the funds available we can invest in these vehicles to obtain
our goals and objectives.
 Benefits of Investment Planning:
The importance and benefits of investment planning are stated below:
• Family Security: Investment planning is important from the point of view of family security. If anything
happens to the working member in the family then the other members of the family will be financially
secure by the investment.
• Efficiently manage income: It is quite possible to efficiently manage the income and expenditure of
person with an investment plan. Managing income helps the person to manage other expenditures, tax
payments etc.
• Financial Understanding: Investment planning helps in understanding about our current financial
situation. It becomes easy for an individual to evaluate investment or retirement plan by having
financial understanding.
• Savings: One should invest in those investment vehicles which are highly liquid. Funds can be easily
taken out from those investments in the case of emergency.
• Standard of Living: The savings created by the investment is very useful in difficult times. For example,
death of the working individual in the family affects the standard of living to a great extent. That time
the investment made by the working person becomes useful source of income of the family.
 Objectives of investment planning
• Safety: One of the main objectives of Investment planning is the safety of our family, in the terms of finance.
One should also invest in safe investment vehicles. Investment is money market is safer than bond market.
• Income: In order to generate greater income, we need to invest in higher risk investment vehicles to get
higher income from it. Investors must analyse properly, evaluate their risk-return ratio and accordingly invest
in appropriate asset classes in order to enjoy the benefit of maximisation of returns. Therefore a proper
investment planning is very important.
• Growth of Capital: Capital gain is different from the returns in the sense that they are only realized when the
securities are sold at a higher price than the price in which it was originally purchased. Selling at a lower price
leads to capital loss. Therefore investors who want capital gains should invest in securities for longer term.
• Tax Minimization: An investor may take up those investments in order to opt for tax minimization as a part of
his investment strategy. For example a rich businessman may want to seek those investments with
favourable tax income in order to reduce tax.
• Liquidity: Many investments are liquid which means they can be easily converted into cash. But achieving
this level of liquidity requires sacrifice of certain level of income.
 How to create a solid investment plan?
Before investing in any investment vehicle, a solid investment planning is required. If we do not plan
then all our investments will turn into a mess. Planning is a very important step before investing.
 1. Find when and how much you are saving
• This is the first step of investment planning. As soon as we are employed
we should start saving. Whatever our salary is we should not spend all of it
and start saving for our retirement and unforeseen emergencies.
• There can be many unforeseen emergencies in our life such as life
threatening diseases for which saving are important. We should also
 determine how much to keep aside every month for our savings. Some of
the investment products require a very little amount to save. So even if we
have less money to save, we should not worry about it.
 2. Set your financial goals
We need to identify our short term as well as long term goals. This is how we start goal setting in investment
planning. Our goals can be saving for a vacation or buying some gadget which we really want to own. This
can be termed as short term goal as saving required for this is less than twelve months.
Payment of home loan requires 3-4 years of sayings and it can be categorised as medium term goal. Long
term goals include child education and marriage.
Identifying and setting our goals is an important step in investment planning. It should be well defined by
adding some value to it. We should have the clarity about the goals which we wish to achieve. Different
goals require different investment planning like:
• For retirement: Retirement planning is a long term goal. Retirement planning requires investing in health care insurance
and other types of insurances.
• For child education: After becoming a parent, one should start planning for their child’s future as nowadays education
have become very expensive. One should invest in comprehensive health and education plans.
• For child higher education: For this goal, one should start investing in a combination of mutual funds through SIP with
equity and debt exposure.
• For child marriage: Since it is a long term goal one can take a little more risk in the terms of choosing mutual fund.
• For buying a house: Buying a house requires huge investment and one should be financial ready for making such huge
investment.
• For creating emergency fund: One should always invest in liquid fund for creating a liquid fund. As it is an emergency fund,
one can take out money when required in emergency.
 3. Analyse your risk taking ability

• We should know our risk taking appetite. If we have just start earning
then our risk taking appetite is very less. We should invest in those
investment vehicles which has less like fixed deposits.
• People who have ample money to save, their risk taking appetite in
more. They should invest in those investment products which have
higher risk like investing in index stocks or mutual funds. The risk taking
analyse is a very important step in investment planning. One should also
go through all the risks associated with the investment vehicles before
investing in them.
 4. Create a savings portfolio
• After determining goals and risk taking appetite, the next step in
investment planning is to create a savings portfolio. One should have a
diversified portfolio which should include many investment vehicles such
as stocks, gold, bonds, fixed deposit, real estate etc.
• The main purpose to have a diversify portfolio is to diversify the risk
associated with investment vehicles. Some investment tools may be less
liquated than other. Even if we require money for some emergency we will
able to take out money from the liquidated investment vehicles.
 5. Learn about all investment options
• Before we start investing in we need to learn about all the investment options
available in the financial market. We need to go through all the investment vehicles
such stocks, bonds, gold, real estate, life insurance etch and compare the rate of
returns and risks associated with it.
• Nowadays there are many online website where we can learn about the all type of
investment vehicles and also compare the rate of return and risk associated with it.
It will help us in putting our money in the investment vehicle according our financial
condition and risk taking appetite.
• This will also help in not falling in the traps which are created by the middlemen
who gain commission by selling investment products like life insurance. When we
have enough knowledge about it we can select and buy our own. This is an
important step of investment planning.
 6. Calculate your asset allocation
Asset Allocation
• After determining the risk return portfolio the
investor can develop our asset allocation strategy
in investment planning. The investor can select
from the various asset classes available in the
financial market and allocate assets in such a way
16.67; 20% Equity that it achieves optimum diversification while
25; 30% Mutual Funds targeting the expected returns.
Fixed Deposit
8.33; 10%
Gold
LIC
• The investor can assign percentage to various
asset classes such as stocks, gold, real estate,
bonds etc. based on the range of the volatility of
16.67; 20% 16.67; 20%
their portfolio. The asset allocation strategy
depends on the investor’s current financial
situation and goals.
 7. Know how to build your portfolio
• The most important step in investment planning is implementing the
portfolio plan. After we implement our portfolio plan the management
process begins. It is necessarily to monitor the investment performance
regularly, mostly quarterly and review the portfolio plan annually. The
investor’s goals and situations should be reviewed once a year to
determine whether there are any significant changes.
• The main purpose of reviewing the portfolio is to determine whether the
investment is aligned with the investor’s goals. This may be considered as
a last step in investment planning.
 Learn Your Behavioural Biases or Emotions

• While doing investment planning, one should control their emotions and
focus on their goals, costs and how much and how often we save. We
should try to ignore the little dips in the market and have a long term
perspective. We should not get worried about negative returns as it will
turned back to positive returns in long run. So we should have control on
our emotions and stick with our investment plan.
 Conclusion

• As discussed above, a proper investment planning can help us in making

smart investment. If we do not have time to do our own investment
planning, we can take plan of financial planner. They will help us in
making our investment portfolio according to our risk taking appetite
and current financial condition.
Happy Investing!
Thank you!
Questions?
 Definition

CV Resume

A CV, Curriculum Vitae

A resume, or resume, from
which is Latin for “course of
French “to sum up” is a
life” is an in-depth
short, concise document
document which describes
used for job applications in
the whole course of your
the US & Canada
career in full detail