What Is Investment Planning?
A lot of people are confused between Financial Planning & Investment Planning.But, the fact is that Investment Planning is an important part of financial planning. Despite this fact, both these terms are interchangeably used Rate of interest is the core component of Investment Planning Another important thing is that before doing Investment planning you should be aware of the following components:
- Risk appetite of the individual
- Investment goal of the Individual
- Type of Asset in which the person is willing to invest
- Constant Review
INVESTMENT PLANNING IS A 6 STEP PROCESS
Investment Planning is not an easy thing. It is a lengthy process due to which it is divided into few steps which are followed in order to simplify it. These steps are as follows:- Set your Financial Goals
- Child Education
- Child Marriage
- Retirement planning
- Buying New Car
- Vacation planning
- Buying new house
- Priority,Calculation & Maturity date of Financial Goal-
- As discussed above you might be having multiple goals. But, it is also important to decide that which goal come on the top list of your priority.
- Next, comes the calculation part, as it is important to invest the amount that will help you achieve those goals and that amount is decided after calculating the investment required. This calculation can be done using financial calculators that are available online.
- The next step is deciding the maturity date, until when you are willing to accumulate that wealth to fulfil your goals.
- Understanding Investment Options available in market
Fixed income
- Postal Schemes
- Sukanya Samridhi Yojna
- Fixed Deposits
- Capital Gain Bonds
- Tax-Free Bonds
- National Pension Scheme
Mutual Funds
Stock Market
Gold Funds Real estate investment- Asset Allocation
- The Risk that a person is willing to take will decide the type of product that can be chosen. Because different types of product vary in the rate of return & the risk involved
- Age of the Individual
- Duration of the time left for the goal that is to be achieved
- Portfolio Evaluation& Revision
- Next aspect of Investment Planning is to evaluate the performance of the portfolio designed. This step is crucial because it will let the individual know that whether desired results are being obtained or not? Does it further require some sort of shuffling of money in different types of products to increase the rate of return?
- Once the portfolio is designed it becomes very important to review the portfolio on a periodic basis. As Capital Market is quite dynamic in nature and thus it needs to be considered and shuffling is required to keep the portfolio updated.
- Also, if during portfolio evaluation it comes out that the rate of return drawn is not as per expectation then also the portfolio is revised.