9 Steps to a successful Investment Plan

Assessment of Income and SpendingIt is essential for you to know the distinction between gross income and net income. Gross income is the salary from which tax deductions, and contributions to Employees Provident Fund is made. The balance is known as the net salary or the salary you take home. It may sound basic, but as a working professional it is essential that you know the percentage of your salary being deducted for professional taxes and EPF, if any.

Step 1

The easiest way to assess your spending is not to throw the bills or check the list of transactions on your net banking account. The only way to save is by analyzing how you spend and the avenues of your expenditure. Then you can identify the areas where you can cut down and slowly start your savings. Simply speaking, total spending deducted from your net income is your savings. Hence, if you do not have any funds at the end of the month, you need to start figuring out your spending habits and start saving.

Make a List of GoalsPersonal goals define your investment needs. What are your goals? Goals are milestones in your life which you wish to achiever for personal gratification. However, to be able to achieve this you need a strong financial backing. To be able to make a list of goals, the best and probably the most effective way is to put the goals along a timeline.

Step 2

Short Term Goals: These are goals that have to be achieved in a short span of time say a year or two years. These are goals for which you may require corpus immediately.

Intermediary Goals: These are goals that are a little further away. There is still time left for investments and wait for the returns to generate a decent corpus. These goals could be five years or seven years down the timeline.

Long Term Goals: These are goals which are usually to be achieved at an advanced age like retirement or goals set out that you wish to achiever after ten years, or fifteen years or even further.

Find Out Your Total SavingsMoney that is lying idle and is not being utilized to generate returns of any kind could constitute your savings. Gather all the money and get a definite number on your total savings. If you have been working for a few years now and you only have few thousands to account for your total savings, it is not a good sign. The amount you save speaks about your finances more than your net earnings. Hence, it is time you took an assessment of your savings and see where you stand financially.

Step 3

Know Your Investment Needs and Risk Taking AbilityIt is important to note that Investment appetite is based on your investing needs.Another important aspect that defines your investments is your risk taking ability. There is nothing wrong in being careful or even wanting to make profits. In most personal goals it is seen that calculated risk is an essential component to generate returns and facilitate the growth of the corpus. Do not let your risk taking ability be a hindrance to your investment needs; also avoid having unrealistic expectations and taking unnecessary risks.

Step 4

Have an Investment PlanAn investment plan is a comprehensive map which shows how your money is being channeled into various investment instruments. Investment plan also becomes your personal guide which tells you when the insurance premiums have to be paid, the due date for the Systematic Investment Plans (SIPs). As an investor you could make your own investment plan. However, experts are of the opinion that an investor should ideally seek the help of a professional to come up with an investment plan.

Step 5

Get adequate Life and Health InsuranceGet a term plan based on your earnings which gives you coverage of as long as 70 - 75 years at least. You can get a higher term plan or have a greater coverage in the same term plan once your income increases. You could also look into family floater options that cover an entire family for a stipulated premium.

If you never have to use the corpus before maturity, then you have an assured sum that you can use to fulfill your long term goals. While you cannot predict health problems you can make sure you get the best facilities. Insurance not only covers you and your health but it also protects your family in case of an untoward situation.

Step 6

Start Your Retirement PlanningAs investors we tend to ignore the long term goals. Remember that you only have your corpus to support you during the retirement days. Hence, planning for it is absolutely crucial. You do not have to start investing lump sums at an early stage because you will have other goals to focus on. However, a small sum invested every month through SIPs could ensure a happy life after retirement.

Step 7

Need for an Emergency FundAn emergency fund should consist of 3 to 6 months of your monthly income. In your investment plan you must include a component of uncertainty and a financial provision to tackle the uncertainty. The key to having an emergency fund is easy access to funds without disturbing your ongoing investments. Hence, do not invest the corpus for emergency fund in instruments that have a lock up period such as Equity Linked Savings Scheme or fixed deposits. Liquid funds in Mutual funds could be a good option for such corpus where you could invest for as less as a month.

Step 8

Rebalance and Readjust Your PortfolioInvestments are instruments that have to be changed as when our needs change. An investor in their 60s will have a different investment plan than an investor in their 20s. A successful investment plan is that which is reviewed and boosted periodically. Investors should consider asset allocation for various stages of life.

Step 9

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