How to Create an Investment Plan That Works for You?

Investment Plan

Money has a nature similar to water – if you try to keep it in one place, it becomes stagnant, and its value lessens over time, but if you let it flow, it retains its value intact. Putting your money into bank savings accounts and vaults, you may feel secure about your finances. With time; however, there is no guarantee that your savings will be worth the same say, 10 or 20 years into the future.

The only way you can make sure long-term financial sustenance and work towards achieving your goals is to maximize your savings through investments. In other words, you need to park your money into money market instruments that have the potential to compound your savings over time. With long-term investments, you can easily accomplish your life goals such as buying your dream home, finance your child’s higher education, set up a business venture, or ensure financial freedom in your retirement years. If you are looking to create a comprehensive investment plan for yourself, consider the following points.

Start Early

When it comes to investments, your age plays a crucial part in the choice of instrument. It is only when you have ageon your side, you can go for high yielding, high-risk investment opportunities, as you may not have many responsibilities. On the other hand, when you start investing at a young age, you have ample time to recover from any losses due to financial market volatilities. Your investments can not only achieve capital appreciation through the power of compounding but also allow you to create a robust financial foothold before you take up more responsibilities in life, such as starting a family.

Identify Your Risk Tolerance

Risk Tolerance

It is common knowledge in the investment world that higher the risk, the more significant is the potential return. When it comes to investment; therefore, if you choose to invest in instruments such as equities, whose fund value is subject to changes, based on market performance, you subject your investments to a high risk of devaluation while giving them a chance to earn maximal growth.

As an investor; therefore, you first need to assess the level of risk you are willing to take before deciding to invest your hard-earned money. After that, you can easily choose an investment plan that suits your risk profile. For example, if you are averse to putting your investments at risk, you can choose to invest in traditional, low-risk options such as bank fixed deposits or recurring deposits. On the other hand, you can invest in equities if you wish to gain more through high-risk investment opportunities.

Diversify Your Investments to Reduce Risk

The adage ‘never put all the eggs into one basket’ serves as a smart strategy for making an investment plan. While it is crucial that you work on maximizing your savings through high-yielding investment options, it is also necessary that you work on your all-around financial well-being instead of focusing on one aspect. For example, you should not look to invest all your money into equities or money market instruments. You need first to make sure that you have no other pressing financial liabilities to take care of, such as outstanding credit card bills, home loan EMIs, or any existing medical conditions that require urgent treatment. If you are in any such situation, it will be wise to prioritize your debt repayment before considering investing. You must also consider purchasing life insurance and a health plan before considering any investment plans. A life insurance policy provides the much-needed risk coverage, especially in case of an unfortunate event such as an accident or your sudden demise. On the other hand, having a health plan allows you to protect your lifesavings from depletion or to wipe out completely, in case of any unexpected hospitalization expenses or medical contingencies. Overall, your investment portfolio should have a mix of long-term and short-term investment plans, so that you can work towards achieving the future of your dreams without compromising on your present-day needs.

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