What is meant by investment planning?
Investment
planning refers to the process of associating financial goals and functioning
them through building an effective plan. It is known as the primary component
of financial planning. However, investment planning mainly starts with the
identification of objectives and goals. Then the investment planner matches the
selected goals with the available financial resources. These days various
resources are available for investment, such as equities, bonds, cash,
property, etc. So, according to your funds, you can invest in any of these
resources that are most beneficial to obtain your goals and objectives.
Main objectives of investment
planning
●
Safety: The financial safety of
the family is the main objective of investment planning. However, you should
always invest in secure investment vehicles.
●
Income: Higher income is another
objective of investment planning. To generate more significant income, we need
to invest in higher-risk vehicles to earn higher income from it.
●
Growth of Capital: Investment planning is
also applied for capital growth. Thus, investors who want capital growth invest
in securities for the longer term.
●
Tax Depreciation: An investor may take up
investments to opt for tax depreciation as a part of an investment strategy.
●
Liquidity: Multiple investments are
liquid and easily converted into cash. But acquiring this level of liquidity
requires sacrificing a certain level of income.
Significant benefits of Investment
Planning
There
are multiple benefits of investment planning, some are mentioned below:
●
Family Security: It is one of the most
significant benefits. Investment planning is essential for the security of the
family. If anything happens to the operating member of the family, then the
other family members will be financially stable by the investment.
●
Better management of
income:
With a specified investment plan, it becomes easier to manage income and
expenditure effectively. Managing income allows an individual to manage other
expenditures, such as tax payments, etc.
●
Savings: Investment planning helps
to save money for emergencies. Investing in highly liquified vehicles helps to
take out funds when needed.
●
Better financial
understanding: Investment planning helps understand the current financial situation of
an individual.
●
Standard of Living: Investment planning helps
manage a better living standard. The savings formed by the investment is
beneficial in difficult times.
How to create a substantial
investment plan?
Before
investing in any vehicle, solid investment planning is essential. If we do not
plan better, all our investments will become a mess. However, to create a
substantial investment plan, you need to go through these steps:
- Find
how much you want to save: It is the first step to making investment
planning. Firstly you should assess how much money you want to invest.
However, we should start saving as soon as we get employed.
- Set
financial goals: Goal setting is essential for investment planning. To
start goal setting, we need to identify our short-term and long-term
goals.
- Analyze
the risk-taking ability: To make an investment plan, analyzing your risk-taking
ability is required. We should invest in such investment vehicles which
have less fixed deposits.
- Create
a portfolio for savings: After determining your goals and risk-taking appetite,
the next investment planning step is to make a savings portfolio.
- Learn
about all available investment options: Before we invest in any
investment vehicle, we need to learn about all the available investment
options in the financial market.
- Execution
of your portfolio plan: The last and essential step in investment planning is
executing the portfolio plan. After we execute our portfolio plan, the
management process begins.
Moreover,
it is essential to monitor the performance of the investment plan regularly,
mostly quarterly, and examine the portfolio plan yearly.