How to Formulate Your Investment Plan?

If you are new to the investing routine or if you are an old player in the field of investments, it is important for you to remember one thing- formulate your investment plan with great diligence. It is not only important to start your investment routine with proper planning in the initial phase, but also to constantly reform those plans as and when required.

The basic idea for formulating an investment plan is to set right your goals and help you to achieve them. An investment plan is basically made for you to sort out your needs in terms of short term and long term goals. Sticking onto these can help you avoid the hassle of getting into a debt; you can buy your dream home without a home loan, or plan a fun filled vacation with your family abroad without opting for a personal loan etc. All this requires systematic and disciplined savings to be followed for a certain number of years. Apart from this, you as an investor are benefited since you will be able to determine the risk-return trade-off. With the help of this information, you will be able to choose between appropriate investible asset classes, regulate your allocation ratio; as to what amount needs to be invested where, and be able to adhere to the particular framework, if you want to bring your dreams to life.

Now, investing in an equities market requires you to be filled with patience and perseverance. No short term magic can help your money grow. There are different plans with different tenors, but if you are looking forward towards building a sizeable amount of corpus at least in the next 20-25 years, its better you invest in those equities that have performed well under different market cycles, sit back and wait for at least 15 years to enjoy the fruit of your patience. Remember, in the short run, the markets are very volatile. But in the long term, they prove to be quite stable. One thing is for sure, if you really want to accumulate a sizeable amount of corpus for your future requirement, it is best advised to start off early.

For various investment purposes, there are two types of approaches– Emotional approach and systematic approach. Under the emotional approach, most investors are likely to take decisions based on conviction or immediate impulses. Now these can turn out to be lucky just a few times and might pull you into loses otherwise. On the other hand, having an indiscipline approach towards investing systematically, may not give you the likely returns you expect. Apart from this, if you look forward towards altering your investment plan from time to time and alter the allocation of your monetary resources to them, you might be on the losing side again. Remember, never become too greedy. If you have achieved the amount of money by which you can fulfill your goal, discontinue your plan or allocate them to a debt fund for a certain period to not lose out on your savings on the eventuality of a market crash.

You as an investor should realize that we live in a global economy where the actions of foreign participants are likely to affect the domestic markets. So, it is very important to analyze and understand the businesses you want to invest in, their fundamentals and how well they have been able to hold their position during the bearish and bullish phases of the market cycles.

If you are a prospective investor it is better if you opt for the Mutual fund route for investing in equities market through the Systematic Investment Plan (SIP). Investing through a Mutual Fund gives you the advantage of getting expertise knowledge from professionals who are aware of the market situation and will be able to guide you as to where your money should be invested and what are the prospective funds in which your money can grow with minimized returns over a period of time along with the zest of tax benefit attached to it.

To sum up, devise an investment plan into short term and long term requirements, make sure you stick to the plan as formulated and not make any hasty conclusions so that the returns will be generated as desired by you in the near future.