Without a proper plan, no project completes successfully. The same goes for investments and trading. Planning and proper execution of their plans help investors perform consistently better over time. Investment planning includes selecting the correct investment options to attain certain desired financial returns. 

Opening a demat account is the first step for investment planning and entering the world of capital markets. After linking the demat and trading account with a savings bank account, one can patiently prepare plans for future investments.

In the age-old debates of trading vs investing, day traders push intra-day trading as the best option for consistent returns, while legendary investors urge participants to follow value investing for long-term returns. Long-term returns are immense and require correct investment plans with timely execution by the investors.

Importance of Investment Planning

Below are some of the important aspects of investment planning shared by some of the experienced investors:

• Earnings through Planned Investments

Investments done today have the potential to grow and provide better returns in the years to come ahead. With the right market conditions and company performance, stock prices tend to rise and selling these stocks, years later, can avail a good profit ratio for the investors. A systematic study and analysis of a few listed shares can provide profits and cash dividends to fuel the small expenses.

• Increase in Income

Years of consistently investing in a group of good stocks enhances the portfolio holdings of the investors. Generally, these holdings are made in companies from different sectors and industries. Diversification helps balance the profit-loss structure and provides investors with returns in the form of dividends.

• Financially Secure and Stable

Investment plannings provide long-term financial stability to investors. Following the investment plans, an investor creates portfolio holdings that could liquidate any time the investor plans or desires. These holdings can also be accepted as collateral for loans when a need for immediate funds arises.

• Compounded Returns

Plans and steps for investing are not undertaken for short-term earnings. Any investor plans and executes investment strategies based on future predictions and expectations. The predictions are made on the company’s growth resulting in the rise of the stock prices, dividend re-investment and increase in the number of shares purchased over time. All these factors help create compounding returns after decades of planning these investments.

Steps to Make Investment Plans for Better Financial Life

• Know Thyself

The important aspect of investment planning is to derive a fixed amount that can be invested in a lump sum or small amounts over a year. To come up with that, one must understand the financial obligations and inevitable expenses borne by themselves. Investment amounts must be separated from disposable income to avoid resulting in unprofitability if withdrawn for near-future expenses.

• Investment Goals

Investors predetermine their financial gains before investing in stocks or bonds. Even though there are risks and uncertainties involved in investing, one must always have pre-planned steps for exiting the position when their goals are achieved. A fixed rate of return or the stock price breaching a certain point can be an indicator for the investor to sell off the position.

• Diversified Portfolio

A diversified portfolio helps investors to maintain the balance of profits and losses among different asset classes. One can invest in equities, mutual funds, bonds, FDs, real estate and insurance plans to attain financial stability during falling market situations. Diversification in different sectoral stocks can also help investors sustain longer.

• Understand Risk-Return relationships

An investor needs to determine the risk level for investment planning. Risks and rewards are intertwined with each other and hence higher the risky stocks, the more will be the return and vice-versa. One must try and rightly predict the risks involved and take further steps considering the potential loss situation.

Conclusion

Investment plans are initiated by investors to obtain huge compounding returns over the years. The importance of following pre-described plans is understood after years of investing. Once the emergency funds are separated from the income, investing these funds with proper secured planning can help individuals smartly deal with future expenses like marriages, kids’ education, purchasing property, loan repayments, etc.

How2invest offers a range of investment options which includes bonds, index funds, and real estate investment trusts.