Investment Planning

If you build a house without a plan, what kind of results can you expect? Theoretically, you could get lucky and end up with the house of your dreams. What’s more likely, however, is that the house wouldn’t be anything like what you had wanted. You might need to move the doors and windows, build new walls and take down others – or worse.

Investing isn’t any different. Without a plan, you could (again, theoretically) get lucky, but the odds are against it. Without goals – and a well-thought-out plan for meeting those goals – you probably won’t end up where you want to be financially, neither in the short term nor in the long term.

Legendary investor Warren Buffett defines investing as, “the process of laying out money now to receive more money in the future.” The goal of investing is to put your money to work in one or more types of investment vehicles in the hope that your money will grow over time.

There are many different ways you can go about investing. You can invest either in Financial or in Physical Assets.

Financial assets include putting money into PPF, Bank FDs, Stocks, Bonds, Mutual Funds, etc., whereas physical assets have the options of Real Estate, Gold, etc. It is very important to decide asset allocation based on one’s risk profile and other parameters.

It’s important to have a well thought-out and comprehensive Investment Plan:

Based on the risk profiling of an individual(capacity and tolerance of taking investment risk), a detailed investment plan is made and put into action with the approval of the client

Financial goals are linked with investments to monitor real-time progress on all these goals.

While working out the investment plan, the following points assume critical importance:

  • Investing is a lifelong activity and not an ad-hoc process.
  • Investing for the long term and letting the money grow on a compounded basis.
  • Albert Einstein famously stated: “Compound interest is the eighth wonder of the world. He who understands it earns it… he who doesn’t… pays it.”
  • Investing with discipline.
  • Asset allocation i.e determining the percentage of the client’s investment to be held in various asset classes like equity mutual fund, debt mutual fund, etc.
  • Asset allocation is an outcome of three main factors i.e Risk taking ability , Expected returns on investments and time horizon.

So once your lifelong goals have been finalized & prioritised, and net cash available for investment has been optimized, the next logical step is to plan out an investment strategy based on your risk profile (judging how much coverage would be enough to protect one’s family and their financial goals.)

In today’s world, mutual funds provide great opportunities to invest in various financial instruments. They provide the right avenue for investing in a variety of market-linked instruments, which have time and again delivered superior returns compared to other traditional investment options.

Let us chalk out a plan for you to get started on making smart, reliable investments which carry the least risk and maximum payoff over the years.

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