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
These components serve as the foundation based on which Investment planning is done.


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
Setting financial goal serves as the foundation of Investment Planning. Because if you are unaware of the fact that what goal to be achieved is, then you will not be able to design the plan that will draw desired results. Financial Goals depends on from person to person based on their family and personal needs. But, it is very important for the Individual to choose realistic goals based on his income. Goals could be any of the following:
  • Child Education
  • Child Marriage
  • Retirement planning
  • Buying New Car
  • Vacation planning
  • Buying new house
Also, another key aspect to be considered while setting Financial Goals is Inflation rate. In simpler language, due to inflation, the value of money which is at present will decrease in future due to inflation. Example: If in today’s cost of education is INR 20 Lac then as per 6% inflation rate this cost will be after 15 years this cost will be approximately INR 48 Lac. So, the planning has to be keeping in mind INR 48 Lac.
  • 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
After the completion of Step 1 next step is that individual should choose under the below-mentioned options available in the market so as to decide which option is best suiting his needs. Investment options available in market are as follows:

Fixed income

Mutual Funds

Stock Market

Gold Funds Real estate investment
  • Asset Allocation
Asset Allocation refers to allocation of money in different types of products discussed above on the basis of following points:
  • 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.