What is Investment Planning?

• Investment planning is the process of matching your financial goals and objectives with your financial resources. Investment planning is a core component of financial planning. It is impossible to have one without the other.
• Investment planning is a process that begins when you are clear on your financial goals and objectives. Our Financial Planning process is designed to help you get clear on how to match your financial resources to your financial objectives.
• There are thousands of different investments. The most commonly used are cash, equities, bonds and property. Each of these have different characteristics and a good investment plan will usually contain all of these.
• By helping you set out clear and measurable goals, we can match the most suitable mixture of investments to each specific goal in the most efficient way. From the outset it is important to build a strong foundation and as your circumstance change, we can help you make any necessary adjustments to keep you on track.

Benefits of Investment Planning?

Investment planning begins after you have taken into account your current and expected income level and have laid down your financial goals. The important aspects of investment planning are:

Capital growth versus regular income: Investors aiming at long-term goals focus on capital growth. A long-term investment will allow you to tide over rough times without changing your plans. Stocks, mutual funds and real estate represent investment options for capital growth. On the other hand, if you’re investing to meet a short-term goal or to give you a regular flow of funds to complement your present salary, you should opt for income investments. These investments generate a regular flow of income in the form of dividends and interest and include fixed-income investments, such as bonds and certificates of deposit (CDs). While making a selection, you should consider the tax implications and associated risks.

Risk: Every investment option represents a unique risk-return trade-off. Typically, more risky investments offer higher returns in order to make it worthwhile for investors to take on the additional risk. Investment planning should take into account an investor’s risk appetite, which dependents on your current income level, savings, lifestyle and responsibilities.

Determine your investment profile: This can be done by considering your risk appetite. There are mainly four types of investment profiles:

• Conservative (Low Risk Tolerance): Such portfolios comprise mainly (about 70%) of income assets, such as fixed interest and cash.
• Balanced (Average Risk Tolerance): This refers to portfolios with an equal emphasis on growth and income assets.
• Growth (High Risk Tolerance): Such portfolios comprise mainly (up to 80%) of growth investments, such as stocks and foreign currencies.
• High Growth or Aggressive (Very High Risk Tolerance): This refers to portfolios with more than 90% of the funds in growth investments.

Review your investment plan regularly: This helps in fine-tuning a portfolio to suit your current financial situation and a change in risk preference.

Objectives of investment planning

• Safety:One of the main objectives of Investment planning is the safety of our family, in the terms of finance. One should also invest in safe investment vehicles. Investment is money market is safer than bond market.
• Income:In order to generate greater income, we need to invest in higher risk investment vehicles to get higher income from it. Investors must analyse properly, evaluate their risk-return ratio and accordingly invest in appropriate asset classes in order to enjoy the benefit of maximisation of returns. Therefore a proper investment planning is very important.

• Growth of Capital:Capital gain is different from the returns in the sense that they are only realized when the securities are sold at a higher price than the price in which it was originally purchased. Selling at a lower price leads to capital loss. Therefore investors who want capital gains should invest in securities for longer term.

• Tax Minimization:An investor may take up those investments in order to opt for tax minimization as a part of his investment strategy. For example a rich businessman may want to seek those investments with favourable tax income in order to reduce tax.
• Liquidity:Many investments are liquid which means they can be easily converted into cash. But achieving this level of liquidity requires sacrifice of certain level of income.