Investment Planning

Today, there are plenty of investment options available for investors. However, risk and uncertainties are associated with each type of investment.

A well thought out investment planning has become an indispensable part in any investment strategy. Proper investment planning eliminates or at least minimizes the risks and uncertainties.

Planning also helps in identifying the right portfolio mix based on the capacity of each individual. Investment planning assists in achieving your long-term and short-term goals taking into account your current income, expected rate of return and investment period, etc.

Investment Planning Process

The process of investment planning involves setting financial goals, both long-term and short term in clear terms.

The next is identifying investment avenues suitable to each individual’s requirements. Analyzing the risk factor associated with each investment and developing strategies to overcome the risk is then followed as the next step. Finally, stick to the investment planning unless otherwise something goes wrong seriously.

For long-term investment it is crucial to maintain stability. Investment planning having flexibility to adjust the changing investment climate is considered to be the right process.

Long Term and Short Term Investment Planning

Financial goals that are long term in nature, say 3 to 5 years or more, focus on augmenting capital. As long term investments can weather rough time, one need not change them in midway. Such investment plans fetch handsome returns in the end of the period appreciating the capital assets. Growth stocks, mutual funds, real estate and gold are ideal instruments to invest for capital growth.

On the other hand, if the financial goals are short term in nature, opting to invest on fixed rate instruments such as government bonds and other debt instruments is ideal. These investments ensure regular income through interests and dividends, and the invested capital is much safer.

Investment Planning Styles

Investment planning should address the risk associated with each type of investment. Investment planning is done taking into consideration the investor’s financial conditions, available surplus funds and investor’s risk bearing ability. There are four types of investor profiles and they are Conservative, Balanced, Growth oriented and Aggressive.

Conservative investor shies from risks and invests mainly on fixed income instruments such as bonds and fixed deposits. Balanced investment profile equates resources earned among both high yielding as well as fixed income investment avenues. Growth oriented profile entails high risk tolerance and exposes around 80% of investments on growth oriented instruments such as stocks, futures, real estate, etc.

Aggressive investors always look for very high yielding investment avenues and this type of investors take very high risk aiming for higher return.