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What is Investment Planning? How To Prepare For Your Future

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What is Investment Planning? How To Prepare For Your Future

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What could be the best investment plan for you? Is it something that helps you get a planned amount of returns? Or is it something that helps you meet your financial goals? Well, it can mean different things to different people. 

We are all different individuals in different financial and life situations. We also come from different backgrounds and have varying incomes, expenses, dependents, liabilities and assets. 

Moreover, there is no single plan that can match each of your financial goals. Therefore, no single plan can be called the "best investment plan in India". 

If you search the internet for "what is the best investment plan in India?" or similar phrases, you might be confused about investing in the various mutual funds offered by various Asset Management Companies (AMCs). 

Are you wondering where to start your investment journey? Let’s first understand what investment planning looks like.

What is investment planning?

Investment planning is the process of aligning your investments to your goals and your risk profile. By analysing your risk profile, you can understand your true potential in investing. 

Here’s how you can arrive at your true potential in investing:

You look for Strengths, Weaknesses, Opportunities and Threats (SWOT). 

Here’s a detailed explanation of each point from your SWOT:

  • In investment planning, your strengths are your income level, job profile and how early you have started investing. 
  • Your weaknesses can be the liabilities, if any and the number of dependants in the family. 
  • You can find opportunities in terms of reducing your expenses to the minimum. 
  • Finally, your investments may face threats from uncertainties like inflation, job loss, theft and medical emergencies. 

This SWOT analysis of your investment potential is the barometer for your risk appetite. It is essential to assess your risk appetite before you plan your investments. 

Next, you need to evaluate your financial goals.

List your SMART Goals

Investment planning is all about you and your goals. 

You invest your money to fulfil your goals, dreams and aspirations for the future. But along with investment, efficient financial planning can also help you stay financially secure and help you reach your financial goals on time. If that is the ultimate objective to which you need to align your investments, wouldn’t it be better to list them down in detail? 

While you are at it, you should also ensure that your goals are SMART (Specific, Measurable, Achievable, Relevant and Time-bound). Otherwise, your plans may be vague or just wishes that will be difficult to achieve.

Another way to reach your goals quickly is to classify your goals as short-term, medium-term and long-term. 

  • Short-term goals have a time horizon of up to three years. Examples of short-term goals are home renovation, buying a two-wheeler and jewellery
  • Medium-term goals have a horizon of three to five years. Medium-term goals may be goals like going on an international vacation with family or buying a new car
  • Long-term goals are those for which you have five years and more. They may be your child’s higher education, retirement corpus, or buying a second home

Write down all your goals, include a time horizon, and classify them into short, medium and long-term goals.

Once you have listed down these goals, make sure you are calculating their actual value. Your goal's real value is their current value plus inflation. For example, if the current cost of an international vacation is around ₹6 lakhs, but you want to take this trip after three years, the true cost of your trip will be the current cost and the inflation over three years.

Now that you have your goals and SWOT report, it's time to manage your risk appetite. 

Cover potential medical threats with adequate insurance

As you already know, the first step towards acquiring gains is to cover your potential losses. By purchasing adequate insurance cover, you can protect your finances from the potential havoc these liabilities can wreak. 

Here are a few popular insurance products to consider:

  • Term life insurance

Lifestyle diseases and other complications add to the uncertainty of health, risks, and death. Also known as life insurance, term life insurance is the most basic form of insurance. It is designed to cover your dependent family members if something unfortunate happens to you.

  • Health insurance

Medical costs increase every year, and as a result, overall healthcare has become more dependent on insurance. Health insurance, also known as medical or medicare, covers your hospitalisation bills and most daycare procedures. You can also avail of cashless hospitalisations at network hospitals. This ensures that you and all your family can financially manage medical uncertainties.

  • Critical illness cover

While your health insurance covers hospitalisations, it may exclude certain critical illnesses. Also, basic health insurance does not cover other expenses associated with critical illnesses like loss of income due to the illness.

Critical illness cover complements your basic health insurance and adds to your financial shield against medical uncertainties. This cover provides a lump sum if you are diagnosed with a critical illness like Cancer or paralytic stroke.

With adequate insurance covers protecting your finances from foreseeable and unforeseeable dangers, you can focus more on growing your finances to provide for your future goals.

Know your risk appetite

Another aspect of your investment planning that needs to be aligned is your risk appetite. Your risk appetite measures how much risk is suitable for you.

Many investors concentrate on the potential growth prospects of investments, but very few look at the risk involved. Risk, too, is a key factor while evaluating an investment avenue. And investments are subject to market risks. 

Understand markets

Markets rarely follow a straight and steady growth pattern. They tend to be erratic, unpredictable and volatile in their movements in the short term. 

This is because markets are driven by the emotions and outlook of investors. Those, in turn, are driven by uncertainties like local politics, geopolitics, natural calamities, weather, population demographics, economic outlook, exchange rates, wars, and inflation.

Changes in these factors affect investors’ emotions and outlook. This causes the markets to be volatile.

It’s better to be prepared to deal with the risk of short to medium-term loss that is caused due to market volatility. While markets are known to grow over the long term, short-term volatility may strike your portfolio unannounced at any time. So, if you wish to redeem your investments, you might even get negative returns. Hence, the potential risk is crucial while evaluating your investment choices.

How to measure your risk appetite?

Your risk appetite is a measure of how much risk you can withstand. Ask yourself these questions: 

  • Are you prepared to deal with short to medium-term risk while pursuing long-term gain from your investments? 
  • How will you react if the value of your portfolio goes down by 30% within a short period? (This can happen in times of major turmoil like the recent COVID-19 pandemic or the global financial crisis of 2008)
  • How will such uncertainties impact your goal-based investments?

The answers to these questions will give you a sense of your risk appetite for your goals. 

Next, you need to understand the types of investments and match them with your financial goals and risk appetite.

Match your investments to your goals and risk profile

Once you have understood your risk appetite and listed your short, medium, and long-term goals, you can match your investment to your goals. 

If you tend to gravitate towards the risk-averse side, you can have more debt and gold mutual funds in your portfolio. You can even consider index funds if you have a medium-term goal. These investments tend to be less volatile than equity mutual funds in short to medium term.

If you have a high-risk appetite and are planning long-term financial goals, you may allocate more to equity-based mutual funds. These funds tend to be more volatile in short to medium term. However, they also have inflation-beating potential returns in the long run. 

While all these exercises are suitable for formulating your investment plan, it is important for you to be convinced about your investments before you go ahead. 

But why should you be convinced about your investments? 

Let's explore this in more detail.

Do your research before entering any investment

Your investments are ultimately for yourself. Therefore, you need to be convinced about your investment decisions. Let’s say you invest in an asset recommended by someone, but you are not convinced about it. For instance, you invested in an asset, but its value decreased in short to medium term due to market volatility. Will you hold on to the asset, or will you let go of it?

In such a situation, do you have the courage of conviction in your investment decisions? Ultimately, this may turn out to be a key factor in deciding whether the investment turns successful and gives good returns over the long term or not. 

Therefore, it’s important for you to put in the time and effort required to research the pros and cons of every investment decision you make. Understand the investment completely and go ahead with it only if you are fully convinced about the growth prospects of the investment. Also, be aware of the potential short to medium-term risks, if any. 

Another way to stay clear of your investment doubts is to seek financial advice from a registered investment advisor. Seeking professional financial advice ensures that you are making bias-free investment decisions. 

Start your investment by choosing the right mutual fund for your goals. Select the mutual fund of your choice using the Fi money app, set your SIP amount and date, and start your journey. Fi also have plenty of research material on mutual funds to help you make informed investment decisions. 

Assess the progress of your investments periodically

Just as you need to regularly keep up with your exercise and diet regimes to stay fit over the long term, you need to assess the progress of your investments regularly and periodically. Once a quarter is a good period to perform the assessment. Check whether your investments are on track to meet your goals. Also, check that they are aligned with your risk profile. 

If they are not, you may tweak and rebalance them to get them on track after the assessment. You can also seek financial advice for rebalancing your investments whenever required to ensure that you are moving swiftly towards your goals. 

To conclude

When you invest, you are trading your hard-earned money from your past for potential gains in the future. You shouldn’t make a casual decision based on hearsay, media reports, anonymous tips, peer pressure or FOMO.

You need to have a sound investment plan in place before you go ahead with your investment decisions. You can follow the above steps to create a rock-solid investment plan that works for you.

Frequently Asked Questions

What is meant by an investment plan?

An investment plan matches your financial goals to suitable investments based on your goal horizon and risk appetite. It is a continuous process involving making financial goals, assigning investments, regularly investing in allocated assets, conducting periodic reviews and rebalancing. 

The Fi money app offers research material and insights to help you make effective investment plans. 

What are the four types of investments?

There are many ways of classifying investments into types. Here are the four basic types of investments that can play an important role in your investment planning:


These are stocks or shares of listed companies on exchanges. Each share represents part ownership of the company. These may be volatile in short to medium term. 

You may invest directly in stocks using a stock broker, mutual funds, or exchange-traded funds, which pool investors’ money in a bunch of curated stocks. 


Bonds are issued by the government or private companies. They have a fixed tenure or period and a fixed rate of interest to be paid to the holder. They are generally less volatile than equities. You may invest directly in bonds, mutual funds, or exchange-traded funds, pool investors’ money and invest in a bunch of curated bonds. 


We all have indirectly invested in them. Examples of commodities are gold, silver, copper, corn, maise, crude oil and more. They are generally less volatile than equities. You may invest directly in commodities using a broker, mutual funds, or exchange-traded funds, which pool investors’ money and in a bunch of curated commodities like gold.

Mutual Funds

Mutual fund investments can hold assets from each of the above asset classes. They pool investors’ money and invest in various curated assets from different asset classes. Additionally, a mutual fund can also invest in other mutual funds. These are called Fund of Funds (FoF). 

You can invest in a mutual fund of your choice through the Fi money app. Just fix your SIP amount and date, and instruct the app to deduct them. Besides, setting up a SIP using the FIT rules can be smart, secure and simple. 

How do beginners invest?

Beginners can first learn about their risk appetite and match it with their various short-term, medium-term and long-term financial goals. If all of this sounds a bit complicated, don’t worry. Your Fi account is designed to simplify your financial journey.

Your Fi account enables you to create Jars for your goals. You can start your savings in terms of short and long-term deposits to meet these goals.  You can also use your Fi account to invest in mutual funds.

With a SIP, you issue a mandate to deduct a fixed amount of money at a fixed frequency from your bank account and invest in a specific mutual fund. The frequency may be daily, week, month, quarterly or half-yearly. Monthly SIPs are the most popular. You can decide the period or the investment tenure for the fund. This way, your investments can regularly happen every month, automatically, without you having to take any action! 

What’s more?

With a SIP, you can be on the right side of market volatility with rupee cost averaging. 

How do investments work?

Investments work better if uncertainties are accounted for. All you have to do is create a solid emergency corpus. A strong emergency corpus can ensure that you can stay on track with your goal-based investments. 

Invest your money in financial assets according to the investment plan. Assess the progress of your investments from time to time. You can also get adequate insurance coverage to protect you and your family from threats. With these, your investments can enable you to achieve your life goals as listed in your investment plan.

You can learn about different mutual funds and choose a suitable fund for your goal with the Fi money app. 

How do I make an investment plan?

Making an investment plan is a comprehensive approach where you learn about yourself and your goals. It is about making a path to your goals and following through. 

Follow these steps to make a sound investment plan:

  1. Know your risk appetite 
  2. List your goals
  3. Categorise your goals into short-term, medium-term and long-term
  4. Make sure you are managing emergencies through adequate insurance
  5. Seek professional financial advice
  6. Start investing 
  7. Track your investments from time to time.
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