Investment Planning is one of the important aspects of Financial Planning. The probability of achieving your financial goals depends on how well you plan your investments.
What is Investment Planning?
Investment Planning is the process of placing your monies/funds into proper investment vehicles based on your financial goals and the time frame to achieve them. How much risk you can afford to take is also an important point here.
We normally give more importance to RETURNS than goals. Example – You get a bonus of Rs 1 Lakh then the first question which may come to mind is – “ Can I get 10% returns if this 1 lakh is invested in XYZ product?”
Rather it should be ‘for which goal should I invest this Rs 1 Lakh?’
Investment Planning Process :
So, how should I plan the investments? Is there a better approach?
- Identify your Financial Goals : These goals can be buying a house, planning for kid’s higher education etc., You can sort them as High, Medium and Low priority goals.
- Analyze how much risk you can afford : You’re the best judge for yourself to decide on how much risk you can take on your investments. There are certain psychometric tests which can be used to measure your risk taking capacity. The risk profiles can be Aggressive, Medium and Conservative.
- Identify time frame for your goals : You can divide the goals based on the duration as Short, Medium and Long term goals.
- Identify financial products : Now based on the above points, identify the financial products which match your requirements.
You can maintain a simple excel sheet with details of your investment planning. You may consider the below format.
Investment planning – Important points to ponder upon :
- Dynamic process – Investment planning and Financial planning is a continuous process. This is not a one time event. Your goals and economic profile may keep changing. Accordingly, accommodate your investments.
- Realistic – Try to set the goal amounts in a realistic way. Consider various factors like your future income growth, job stability, savings rate etc., The goals should be attainable.
- Taxation – While identifying investment products, you may check if they are tax efficient or not. But do not buy them just to save taxes. Consider buying them only if they meet your requirements. Also, find out the tax adjusted returns for each product.
- Re-balancing & Re-allocation – Not only your priorities change over a period of time but also the financial market conditions. Tweak your investment portfolios as per the changing conditions.
- Tracking & Monitoring – Maintain a portfolio tracker to stay uptodate on your investments’ performance. (You may create a portfolio tracker on www.moneycontrol.com).
- Diversification – Identify investments across the asset classes. Spread your risk. Do not invest in one product category only.
I believe that many of us chase only the returns and unnecessarily complicate the financial lives. Do not just chase returns but chase your Goals too. Hope this post is useful. Kindly leave your comments
(You may like visiting my post on ” How to calculate the Future value of investments?”
(Image courtesy of patpitchaya at FreeDigitalPhotos.net)
Very informative and practical suggestions (y)
This article has been very informative. I changed the route of my Investment planning. Thank you for sharing this article with us
hello sree,
I am 30. following is my goals and invest ment.please request you to suggest.
1.Retirement:30 years away
Icici value disc growth-2500 pm
ppf-20000 per year
epf-30000 per year
2. child education:18 years away
Sbi balanced fund-1000 pm
3.home purchase:4 years away
fixed deposits 20000 p m
request you to suggest if my investments are ok. if i have to add any mutual funds to the long term goals, also please suggest the schemes.
please reply
Dear abhee,
Retirement goal is 30 years away from now, so you may consider reducing your allocation to PPF and increase your SIP amount. Or Can add one mid-cap fund to the portfolio.
Kindly note that retirement and Kid’s education goals are high priority goals. So, if you believe that you saving enough for these, you may consider home purchase else you may postpone it for few more years..
Kindly read:
Retirement goal planning & calculator.
Kid’s education goal planning.
thanks sree!
but i am worried if suppose one of the sip performs low(12% expected) after 10 years what should i do in this case? so i contribute to epf and ppf.
please guide
also can you please suggest sip for child education?
thanks for reply sree.
Dear Abhee,
Not taking enough risks can be the BIGGEST RISK.
If you believe that you can achieve the required goal amount with PPF/EPF then its fine.
Kindly read: Mutual Fund investments are subject to risks!
Hi Shreekanth,
Excellent Article !!!! Based on your article i had also changed my entire Planning
– I had surrender all my traditional insurance plan which are 5-6 years old
– Based on payment received had reduced my personal loan burden from 12 Lacs to 8 Lacs – Thanks EMI burden reduced from 34K to 19K.
– Had made excel of all investment and tag them to goal wise
– Start NEW SIPs of Rs 20K since EMI is reduced 20K and expected increment this year by April
-Every SIP had tagged with specific goal ( Like Child education, marraige, Vacation and retirement planning)
Present Scenario
– Term Cover 100 Lacs – max life online
– Traditional insurance 50K (this is not closed as this is my first insurance it is almost 15 yrs i am paying premium and since it is first insurance emotion jude hai)
-Health Insurance (Star Health Family flotter for 10 Lacs)
-New SIP(based on your best SIP for 2017) Started from March 17 of Rs 20K will increase by 20K from May/Jun 17 (Increment expected in April).
-Present investment in mutual fund portfolio of Rs 6 Lacs (No SIP – one time investment only)
-Housing loan – EMI of Rs 29610/-
-Car Loan – EMI of 13812/-
-PL EMI of 19000/-
-Emergency fund -2.5 Lacs (Monthly expenses excluding EMI Rs 25000/-)
-Retirement PF of Rs 7.02 Lacs accumulated till Nov 17 and approx 14K PF contribution (EMP and Employer both)
Pls suggest on my below mentioned planning ?
1) For Education of both child – Inflation calculated @ 10% and ROI calculated @ 12% since time frame is > 10 yrs – It is ok or any changes pls suggest
2) For Marriage of child – Inflation calculated @ 8% and ROI @ 12% – Time frame is > 10 yrs – It is ok or any changes pls suggest
3) For Retirement FV calculated as -Present monthly house hold expense * 12 month * post retirement life 20 yrs. Inflation 8% – Is calculation correct ?
4) For retirement PF contribution calculated return @ 7.5%. – Want to know any excel formula where PF contribution increase every year by 8-9% and able to know future value – Pls guide
5)Planning to buy health cover for father (Super Top up) – as my company provide health cover for my father – Bajaj health cover
6) Planning to buy critical illness cover – Pls suggest
7) Planning to review health cover – myself and family – Planning to buy 3 lacs medical cover and 10 lacs super top up cover – pls suggest
8) Invested in lots of mutual fund scheme – Pls suggest which need to continue
Scheme Investment Current market value
ICICI Prudential Balanced Fund -Dividend Monthly 70,000 77,165
ICICI Prudential Balanced Advantage Direct-Dividend Monthly 55,000 57,802
Birla Sun Life Frontline Equity Fund-Growth 35,000 34,639
DSP BlackRock Micro Cap Regular Fund-Growth 20,000 22,338
Axis Equity Fund-Growth 70,000 106,392
Franklin India High Growth Companies Fund-Growth 15,000 49,658
Axis Children’s Gift Fund Regular – No Lock In Growth 25000 27108
HDFC Childrens Gift Fund-Investment Plan 10,000 18,997
HDFC Small Cap Fund Regular-Growth 5,000 15,403
Sundaram Infrastructure Advantage Fund Regular-Growth 10,000 11,842
HDFC Infrastructure Fund-Growth 5,000 8,716
Axis Children’s Gift Fund Regular – No Lock In Growth 25,000 27108
SBI Magnum Global Fund-Growth 51,000 53,101
Reliance Top 200 Fund Retail-Growth 15,000 38,516
Reliance Vision-Growth 15,000 25,428
IDFC Sterling Equity Fund Regular-Growth 5,000 20,441
UTI Opportunities Fund-Growth 10,179 15,962
Birla Sun Life Special Situations Fund-Growth 5,000 10,358
SIP
Mutual Fund Scheme Name SIP Amt
Franklin Prima Plus Fund 2000
ICICI Pru Value Discovery Fund 2000
DSP Micro Cap Fund 3000
Franklin India Prima Fund 2000
HDFC Balanced Fund 2000
ICICI Pru Focused Bluechip Fund 3000
HDFC Midcap Oppurtunity Fund 3000
Franklin Smaller Companies Fund 3000
===========================
Total 20000/-
My age is 36
Dear Aashish,
1 – Kid’s education goal : Education inflation can be very high in cities, so you may try checking out for other probabilities too, like inflation at 12% or 15%.
2 – Marriage expenses goal : ok
3 – Retirement goal : ok
4 – EPF Corpus calculator , plz visit this link..
5 – Suggest you to take a stand alone mediclaim policy for your father and then can opt for a super top up plan.
6 – Kindly read: Best portals to compare health insurance plans.
7 – Ok. Read : Best Super top up plans.
May I know , since how long have you been investing in MFs? Any reason or strategy for investing in so many MF Schemes?
Hi Shreekanth
Thanks for your views. Details required you as below :
ICICI Prudential Balanced Fund -Dividend Monthly 70,000 77,165 > 1 yr
ICICI Prudential Balanced Advantage Direct-Dividend Monthly 55,000 57,802 < 1 yr
Birla Sun Life Frontline Equity Fund-Growth 35,000 34,639 < 1 yr
DSP BlackRock Micro Cap Regular Fund-Growth 20,000 22,338 3 yrs
Franklin India High Growth Companies Fund-Growth 15,000 49,658 > 8 yrs
Axis Children’s Gift Fund Regular – No Lock In Growth 25000 27108 > 1 yr
HDFC Childrens Gift Fund-Investment Plan 10,000 18,997 >4 yrs
HDFC Small Cap Fund Regular-Growth 5,000 15,403 > 8 yrs
Sundaram Infrastructure Advantage Fund Regular-Growth 10,000 11,842 > 8 yrs
HDFC Infrastructure Fund-Growth 5,000 8,716 > 8 yrs
Axis Children’s Gift Fund Regular – No Lock In Growth 25,000 27108 > 1 yr
SBI Magnum Global Fund-Growth 51,000 53,101 8 yrs
Reliance Vision-Growth 15,000 25,428 > 8 yrs
IDFC Sterling Equity Fund Regular-Growth 5,000 20,441 > 8 yrs
UTI Opportunities Fund-Growth 10,179 15,962 > 8 yrs
Birla Sun Life Special Situations Fund-Growth 5,000 10,358 > 8 yrs
All SIP start this month only.
No strategy… Just invest some one say invest in this some one say invest in that and had invested… Post reading your blog Planning to update… or you can say corrected portfolio.
Pls guide
Dear Aashish,
Suggest you to go through below articles and attempt trimming your portfolio.
How to select right mutual fund schemes?
MF portfolio overlap analysis tools.
My MF portfolio picks
Best Equity funds.
Hi Sreekanth,
Need your suggestions and advice on the health of my investments
I am an IT professional in Bangalore with an Annual Income – 20 Lakhs
My current investment details
1) FD of 30 Lakhs
2) Life Insurance of 5 Lakh with 5 lakh accident rider – Jeevan Saral since 2006(monthly premium of 2042)
3) Home Loan for 23 Lakhs for 15 years(since Dec,2010)
Future Goals:
1) Buy a plot and construct a villa – in 3 years — fund required 50 Lakhs
2) Post pension hasslefree life
3) kids of 6 yrs and 2 years – Educational expense
4) Upgrade vehicle in 1 year – fund required 5 lakh
5) Emergency fund (with liquid 1 lakh)
NB : Medical Insurance for parents, Family covered by Employer
Podamj
Dear Podamj,
1 – Any specific reason or objective for maintaining Rs 30 Lakh FD? What is the FD tenure?
2 – You can take a term plan with adequate life cover and then surrender the existing policy.
Read :
How to get rid off unwanted life insurance policy?
Term insurance Vs Traditional plan.
Top Term insurance plans.
3 – Start accumulating your emergency fund. It can be around 6 to 9 times of your monthly living expenses. You may consider Short-term FDs/RDs & liquid debt funds.
Read: Best Debt mutual funds.
4 – Read : The 6 most common personal finance mistakes.
5 – Retirement planning & Kid’s Education planning should be given top priority over other goals.
Read:
Kid’s education goal planning.
Retirement planning goal calculator.
Thanks Sreekanth for your reply.
> The reason for 30 lakh FD was to have emergency funds. These are like for 390 days culumative types.
> From a term life insurance plan, is LIC the most recommended than the new generation ones?
> Apart from these, I have a surplus of 70k to be invested. What would be best option?
Regards,
Podamj
Dear podamj,
You may maintain 6 to 12 months of your monthly living expenses (max) as an Emergency Fund.
A very high figure & for longer period may not be required and advisable.
Read : Avoid FDs for longer periods…
Kindly read :
Best Mutual Funds to invest for 2016.
Dear Srikanth,
Recently happened to read your articles. Appreciate your efforts to provide financial education to people like us.
Your articles are worth reading, knowledgeable, all of us have to follow for financial growth.
Thank you once again.
Thanks,
harinath
Thank you so much Harinath..keep visiting and kindly share the articles with your friends 🙂
Hi Shreekanth,
I am working as a Wealth Manager, and i appreciate that you are explaining in such a good way. how should i contact you. If you can then please wats app me your no on 9759012244.
Dear TUSHAR,
Thank you for your appreciation. You may reach me on my email-id, sreekanth @ relakhs.com
Hi Sreekanth,
How are you?
I am 37 year old,
FYI, below was my financial planning status 3 months back,
NO planning for Retirement. NO plan for my Childs education. No Contingency fund. No Term Plan, so was not insured enough . Have invested in real site (bought a plot).
Below is my Finance profile after going through most of your articles on Financial planning, Retirement planning, Insurance, Mutual funds
Contingency fund-have accumulated 70000k. need to accumulate another 80000k. target is 1.5L
Retirement plan-
PPF-1.6L already invested (planning to invest annually50000k),
UTI equity fund, Franklin prima plus, ICICI balanced fund (Have started monthly SIP of 5000k each for 20 Years(
Insurance – Have cancelled 3 traditional insurance plans (lost accumulated bonus), Have bought Term plan of 50 lakhs from HDFC click to protect plus. plans of buying another 50 lakhs coverage in next year.
Daughter edu/marriage- Franklin smaller co (monthly SIP of 5000k ), Suvarna samruddhi scheme( 80000k annually)
have plans of buying stand alone health insurance in next year (presently covered under company group insurance)
next years school fees- investing monthly 5000k in RD
Dropped idea of buying Flat on loan. I am ok with staying in a rented house at the moment. Need to start savings for house construction.
kindly provide your valuable suggestion/ comments on above mentioned my plans.
I feel so confident after reading above plans/details now.
thank you so much again for providing valuable financial feedback for people like me. your articles are a eye opener.
thanks/regards
Mahesh prasad
Dear Mahesh,
I am doing good, thank you. How about you?
Retirement plan : You may kindly consider including one Mid-cap oriented fund in your portfolio.
Daughter’s Edu/Marriage Goals : Increase allocation to mutual fund from SSA.
Have you opted for any Optional riders along with the Term insurance plan basic cover? You may consider buying a stand-alone Personal Accident cover.
Also, suggest you to read my article on Super top-up health insurance plans.
Superb work and appreciate your planning / progress.
Hi Srikanth,
Sorry for the late reply…Thank you so much for your inputs.. Sure will try to update things as suggested…
I have made slight change. stopped SIP from ICICI direct( To avoid extra charges). Have opted for Direct plans for above mentioned.
Retirement : Franklin prima plus , UTI Mid Cap, UTI Large Cap, ICICI Balanced fund (SIP of 5000 in each fund)
Daughter’s Marriage/Edu : Frankilin smaller co. (5000 SIP), Axis long term equity(30000 annually) , Sukhanya Samruddhi Scheme (50000 annually).
Kindly provide your suggestions on the above..
Term Insurance : Yes, I have opted for optional rider.( Partial / full accidental disability)
Dear Mahesh,
Your portfolios and analysis looks ok to me.
Do not postpone buying an independent stand-alone health cover 🙂
Hi Sreekanth
Have a prosperous and Happy Deepavali to you and your family.
Am planning to buy Apollo Munich – Optima restore family plan of 5 lakhs for Self, Wife and Daughter .
Please let me know about the plan.
thanks / regards
Mahesh prasad
Hi Sreekanth
I had a chat with Max bupa after sending above message. They are saying waiting period is not there for any disease in Heart beat but in Apollo few diseases are covered after 1 year and few 2 years.
Please need your feed back.
thanks/regards
maheshprasad
Dear Mahesh,
I understand that it is very tough to identify best and suitable health insurance plan.
Suggest you to compare various plans before you take final decision.
Kindly go through my article – Best Portals to compare Health Insurance plans.
Happy Diwali 🙂
Hi Sreekanth
thank you …
Hello Sreekanth,
Very informative web site. Really Love it.
1.I am an IT employee working in an MNC and i want to save money for my retirement.Till now i have not saved anything.Last years i got married and i have decided to save money from this year onward.I have chosen below three ELSS mutual funds for long term(10-15 years) and tax saving .Could you please suggest which one i should choose and how much should i invest per month.Do i need to split among the three.
1.Axis Long Term Equity Fund(G)
2.Franklin India Taxshield Fund
3.ICICI Pru tax Plan
is it good to invest for 10-15 years in above funds to get decent return?
Just to inform that i have planned to save 15k per month.Please suggest what are the different long term options are available to get a decent return.Just to let you know that i have a running LIC plan which is 10K per annum.
Thanks in advance.
-Pradeep
Dear Pradeep,
You may opt for only one ELSS fund. You can also select couple of funds (Equity diversified & a mid-cap fund) for long-term wealth creation.
Let me know the LIC plan name.
Kindly go through the below articles and revert to me;
Best online term insurance plans
Financial planning pyramid
Best equity funds
Best balanced funds
Retirement planning made easy.
Dear Sreekanth Reddy,
Thank you very much for your valuable feedback on financial planning .
Can you please tell me,i have one LIC Jeevan Anand policy,plan 149 and Term 72(Commencement Date-28 Mar 2013),i have paid 11 premium(Quarterly) .But after read your blogs now i am thinking ,it was a wrong investment.
1- Can i surrender this policy now ?
2- If i will surrender the policy,how much amount will get ?
3-If i will surrender,it will loss for me for future ?
4- if i will close the policy and invest in other(please guide for a plan) it is better for financial goal ?
Awaiting for your valuable feedback for my above query.
WBR-Jitendra Sahoo.
Dear Jitendra,
You can take tough decision to make it lapse.
Else pay for 3 years and surrender it. Do note that if you surrender before 5 years, the Surrender value amount should be included to your taxable income in that financial year.
Read my article – How to get rid off bad insurance?
Yes, it is advisable to invest in equity mutual funds to achieve your long term goals. Also, do not postpone taking a term plan.
Dear Mr. Sreekanth,
Thank you very much for your valuable suggestion for me.
I have read your article and there is mentioned – after 3 year you can stop to pay the premium and this policy will be automatically convert to REDUCED PAID UP policy.In that case only sum assured will be reduced and i will get the vested bonus(Upto 3 year premium) during maturity. Hope so this option will be good for me.It is better than totally loss the money.
Is it applicable for LIC Jeevan Anand ,Plan 149 ?
If i will surrender after 3 year,can i get the vested bonus ?
If i will take a online insurance from LIC/ICICI pru life,which one is better ?
Awaiting for your reply.
With Best Regards
Jitendra Sahoo.
Dear Jitendra,
Then you can make it as a PAID-up policy. It is applicable to Jeevan Anand.
Which plan or policy would you like to take online?
Dear Mr. Sreekanth,
Thanks for your reply.
I am planning to take ICICI Pru iCare II or LIC e-Term Plan .Please suggest for this.
Dear Jitendra …both are good ones. Select one out of the two and do disclose all the required information in the proposal form.
Thank you Mr. Sreekanth.
Can you guide me ,what type of information should be disclose in the proposal form ?
Because i don’t have no idea for the above.
Dear Jitendra..suggest you to download a sample proposal form and go through it. Revert to me if you need any clarification.
You need to disclose all your personal details,income,health /medical history, dependent details,existing life insurance policy details etc.,
Hi Sree,
Really wonderful explanation with sample goals for people who are zero (like me) in their finance planning. Great work and keep it up. Started reading daily one post/day to get awareness on financial things.
Dear Balamurugan,
Thank you so much for following my blogs. Keep visiting and do share the articles with your friends 🙂
Hi,
Do you have any writings regarding sample investment paln for a mid age (32-35) person.
Example – Age 32-35
Married 1-2 years
wife non working
No children (plan to have with in 1-2 yrs)
No liability like home loan etc
working – private sector
Sal – 50 th.
Monthly expense – 20 th
How mush one should invest with this folio ..
health insurence
child education
emergency (like Job Less)
retirement planning (MF/PPF/NPS) – having PPF (full invested for last 7 yrs)
short term (5-6) / Mid term (8-10 yrs) long term (15-20) investment
Dear Sankha,
Suggest you to go through the below articles, you may get rough idea about few important aspects of Personal Financial Planning;
Financial Planning Pyramid
Top 7 best online term insurance plans in India
Super Top up health insurance plans
Retirement Planning in 3 easy steps
Calculate how much to invest for your kid’s education
Top 6 most common Personal Finance mistakes people make
Hi Sreekanth, a bit out of the way question relating to Demat A/c Opening:
1. Factors to consider while opening a demat A/c like A/c Opg charges, Annual maintenance fees, Custodian fee and transaction fee
2. Where to open a demat a/c as a preference : a bank like HDFC or a DP like Anand Rathi ? Reasons for the same
3. For MF investing, is a Demat A/c required?
4. Kindly let me know best options for Demat including Axis Bank and Anand Rathi and their comparisons with pros and cons.
Please guide.
Dear Sanchit,
I believe that the fees are directly dependent on the quality of service, availability of value added services, availability of various investment options etc., Go ahead with any Demat account with which you are comfortable with. (ICICI Direct is a bit costly one). I prefer to open a demat account with an entity which also has a banking set up.
You do not need a demat account to invest in mutual funds or sell the units that you have purchased.
I do not have experience with Axis & Anand Rathi. (You may check out fundsindia.com, sharekhan or kotak securities)
Hello,
Is there any online based web tool to track.
Thanks,
Chandra
Chandra – If you want to track your financial investments then suggest you to create a portfolio on http://www.moneycontrol.com or economictimes website. You can add shares,mutual funds,ULIPs,fixed deposits etc., to the portfolio.
Nice Post Sree. This way of goal based planning helps to achieve the goals and at the same time saves us from mindlessly chasing money and loosing balance in life. It brings order and financial peacefulness.
Thank you. Agree with you. Financial freedom and peace of mind are more important.
I appreciate your effort to educate common investors through simple presentation on common topics like this. Financial Planning and investment explained very nicely here and it is up to the point. Please keep it up.
Thank you. Keep visiting the blog.