Making an Investment Plan: A Step-By-Step Guide

The key to being a successful investor and getting valuable returns from the investment is proper planning. If you are an amateur investor, the following guide will help you make the most of your finances.

Being a successful investor takes more than just picking the right investment schemes to put your money in. You must be aware of several factors, including the current market condition, financial goals, etc. It is also paramount to define your risk-taking ability, and a timeline to determine the asset allocation. If you are a first-time investor, the following tips will greatly help you make an investment plan.

Assess your current financial situation

The first step to making an investment plan for the future is to assess your current financial condition. You must determine how much money you must invest every month, after taking care of the regular family expenses. This will allow you to know the amount you can afford to invest in.

It would help if you also considered how liquid or accessible your investment must be. If you may need to quickly withdraw cash from your investment, you may consider investing in liquid investment instruments like stocks, rather than long-term investment schemes like five-year fixed deposits.

Set a goal

Once you are sure about how much you can afford to invest, the next step is to set a goal. Ask yourself, why are you investing? What are the returns you wish to earn? The goal can be a long-term goal, like building a retirement corpus, or it can be a short-term goal like buying a car.

Apart from setting a goal, it would help if you fixed a time within which you wish to accomplish the goal. In other words, you must define how quickly you want your money to grow. Do you want quick growth, or are you comfortable with staying invested for a longer period?

The goal will play a crucial role in the choice of an investment scheme. So, take your time to decide on both long-term and short-term goals.

Assess your risk-taking capacity

The next critical step in making an investment plan is deciding how much risk you are willing to take. When you start investing at a young age, you can afford to take more risks, and your portfolio will have the benefit of time to recover over a period.

But, if you start investing when you are old, you must look for risk-averse investment opportunities. Additionally, you must know that the investments that have high-risk also have high returns potential. Based on your financial situation and your goals, you must choose the investment schemes.

Choose the right investment scheme

The final and the most critical step in making an investment plan is to choose the right investment scheme to put your hard-earned money. Your budget, financial goal, risk-taking capacity, will help you choose the right type of investment. If you are looking to invest in a long-term goal that provides decent returns with tax benefits, you can consider investing real estate, equity mutual funds, mutual funds, National pension funds, etc.

If you are looking for short-term investment options, then you can consider investing in debt mutual funds, Unit Linked Investment Plans (ULIPs), Tax saving fixed deposits, National Savings Certificate (NSC), Rajiv Gandhi Equity Savings Scheme (RGESS), etc.

Whatever investment you choose, make sure that you establish a diversified portfolio and refrain from putting all your money in a single investment scheme. A diversified portfolio helps you get stability and growth, but it also enables you to mitigate the risks if the market falls.

Keep a close eye on the investments

Last but not least, once you have made the investments, it is not wise to leave them alone and expect the money to grow automatically. You must periodically review the investment performance and rebalance (if needed). Maybe you are not putting enough money in the scheme that has been performing well, or perhaps you are depositing more than you need.

Regularly reviewing the investment portfolio will help you take the necessary actions to avoid risk and accomplish your goals.