PLANNING LONG-TERM INVESTMENTS

Based on their background, fluctuating income, expenses, dependents, liabilities, and assets, each person has a unique financial life scenario.

Furthermore, no one plan can help you achieve all of your financial goals. As a result, no particular plan can be called the "best investment plan in India."

While looking for the "Best Investment Plan in India," it is simple to become confused about investing in the numerous mutual funds that are offered by different Asset Management Companies (AMCs).

Let's begin by gaining a basic idea of what investment planning entails.

WHAT IS INVESTMENT PLANNING?

The process of determining and matching your financial goals and objectives with your available resources and risk tolerance is known as investment planning. Your true investing potential can be realized by analyzing your risk profile.

You may determine your true investment potential by using the SWOT analysis of your financial strengths, weaknesses, opportunities, and threats. The following are examples of how to convey this SWOT: 

PLANNING LONG-TERM INVESTMENTS

LIST YOUR FINANCIAL GOALS

It is usually preferable to write out your objectives so that your investment is in line with them.

Goals that are "SMART" (specific, measurable, achievable, relevant, and time-bound) assist someone in setting and achieving realistic financial objectives.

Even if investing money will assist you in realizing your aspirations and long-term objectives, effective financial planning is essential for ensuring your financial security and accomplishing your goals. 

We classify Goals in terms of time horizon as below:

Short-term objectives (time frames of up to three years) include, for example, purchasing jewelry, a two-wheeler, etc.

Medium-Term Objectives (time horizon of three to five years): Buying a car, taking a trip abroad, etc.

Long-term objectives (time horizon of five years and mother re) include, for example, saving for a child's college tuition, retiring comfortably, or purchasing a second property.

Make a list of all time-based objectives and categorize them into short, medium, and long-term goals. Goals' Real Value or Actual Cost

Actual value of goals = current value of goals + inflation

Example: Let us consider a goal which is an international vacation, after three years and the current cost of an international vacation is ₹6 Lakhs. Hence the actual cost of the goal will be ₹6 lakhs plus inflation over the next three years.

KNOW YOUR RISK APPETITE

In order to achieve your financial objectives, you must be willing to invest in products carrying the highest level of risk that you are able to tolerate. Ideally, you should arrange your investments based on your level of risk tolerance.

Risk is an important consideration when assessing an investment opportunity, therefore investors should consider both possible risk and growth prospects of the investment. Market risk affects all investments.

INVEST IN INSTRUMENTS MATCHING YOUR GOALS AND RISK PROFILE

You are prepared to match your investment to your goals if you have an awareness of your risk appetite, market risk, and the time-sensitive goals you have listed.

If you tend to be risk-averse, you can increase the proportion of debt and gold mutual funds in your portfolio. Even consider investing in index funds if your objective is medium-term. In the short to medium term, these investments often have lower volatility than stock mutual funds. More allocation to equity-based mutual funds is advisable for those having a high-risk appetite and are planning long-term financial goals. These funds tend to give potential returns against inflation in the long run although they tend to be more volatile in short to medium term.

REVIEW THE PROGRESS OF YOUR INVESTMENT

Similar to how you must routinely monitor your exercise and diet plans to stay in shape over the long run, you must also continuously monitor the progress of your assets over time. It is advised to monitor your investment's progress on a quarterly basis to evaluate how it is trending.

Your portfolio will need to be adjusted if the investments are not performing as expected. To rebalance your investments and move more quickly towards your goals, you can also seek financial advice if necessary.

TO CONCLUDE

Because it is your hard-earned money, exercise caution when making decisions. You shouldn't make a hasty judgment based on rumors, news stories, recommendations from strangers, or peer pressure.

You should have a solid investment plan based on professional counsel, your own clear understanding, and confident investing decisions before moving on with your investments.

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