Investment Plan

Brian Harris

How to Build an Investment Plan That Works for You

financial situation, invest, Investment Plan, Works for You

Today, in the purview of the rising cost of living, it is prudent to invest in different instruments that provide valuable returns. But, investment requires proper planning. Here are a few simple yet highly effective to help you build an investment plan. 

Everyone has their unique financial goals. For some, the goal would be to build a decent retirement corpus. For others, it would be opening a new business. Defining a feasible goal is a critical step towards making an investment plan. Once you know why you want to invest, choosing the right investment options becomes much easier. 

If you are looking to build an investment plan that works, you must consider the following factors: 

What is your current financial situation?

Before you start making an investment plan for the future, you must review your current financial situation. You must decide how much money you must invest to accomplish your future financial goal. You can do this by preparing a budget to assess the maximum amount you can keep aside for investment purposes after meeting your expenses. This will help you know exactly how much you can afford to invest. 

Set a goal

One of the critical steps in making an investment plan is to know the purpose of investment, i.e., defining your goal. Apart from deciding the goal, you must also determine your timeline on when to accomplish your goal; how quickly do you want to earn returns from your investments? Do you want to make quick returns, or are you prepared to stay invested for the long-term?

All your goals can be categories under three main heads – growth, safety, and income. Safety is when you are looking to maintain the current level of wealth, income is when you want your investments to provide you regular income to meet your expenses during old age, and growth is when you build a corpus over the long-term that you can use later. Based on these goals, you can choose the best investment path. 

Know your risk tolerance

Once you are sure about the goal, the next step is to assess your risk-taking capacity. Generally, when you start investing early in your career, you have the benefit of time to take more risks, and your portfolio can recover from the losses (if any). If you are older than 40 years or are nearing your retirement age, it is better to invest in low-risk investments in a lump sum to spur the growth.

Additionally, you must know that the investments that carry high risks also yield higher returns. So, based on your age, and risk-taking capacity, you must choose the investment path wisely. 

Where to invest

Once you know your current financial condition, have a goal in mind, and are aware of your risk-taking capacity, the next step is to decide where to invest. If you are young and are willing to take the risk, you can spend a significant portion of the investable amount in equity-related instruments. If you are looking for low-risk investment opportunities, you can consider investing in debt mutual funds or balanced funds. You can also expand your portfolio with investments in unit-linked insurance plans and national pension schemes, all of which are low-risk options. 

Keep track of your investments

After you invest your hard-earned money in various investments of your choice, you must keep a constant tab on the performance of the investment and make timely adjustments to accelerate the growth. Regular monitoring will help you understand the funds that are performing well, and ones that are not yielding expected returns so that you can re-allocate the funds. Also, based on the market condition and financial feasibility, you can invest more money in high-performing funds.