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A Financial plan gives us an opportunity to save money for your future needs by Investing in financial instruments. There is no such thing as a good Investment plan or a bad investment plan. Each plan can be good or bad depending on how well you create your plan Basis your needs.
You might choose a long-term plan for high returns or a short-term plan for gaining minimal returns, which mainly depends upon your goals. Therefore, it is important to create an investment plan wisely keeping in mind your Financial goals. We have listed some of the steps to create the best investment plan.
One needs to understand his or her risk profile here for investing. Risk profile would depend on various factors such as:
Risk Ratings |
---|
Aggressive |
Moderately Aggressive |
Moderate |
Moderately Conservative |
Conservative |
Once you have your Risk assessment or rating in place, the next step is to choose the Asset Allocation.
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Putting all your eggs in one basket is never a good idea, and hence one needs to diversify their holdings across asset classes (equity, debt, cash, commodities {Gold}). This asset allocation will ensure that various asset classes perform over time and give a good return on the overall Portfolio.
A sample asset allocation could be:
Aggressive | Moderate | Conservative | |
---|---|---|---|
Annual return | 16% | 14% | 11% |
Annual Standard Deviation | 15% | 10% | 6% |
Debt | 30% | 50% | 70% |
Equity | 60% | 40% | 20% |
Commodity | 10% | 10% | 10% |
Total | 100% | 100% | 100% |
Given the risk that one can take, different allocations to equity are proposed. The higher the risk-taking ability more the allocation to equity. There are also various thumb rules like equity allocation to be 100 - (age of the person in years) and rest to be in debt.
Fund NAV Net Assets (Cr) 3 MO (%) 6 MO (%) 1 YR (%) 3 YR (%) 5 YR (%) 2023 (%) Sub Cat. DSP BlackRock Equity Opportunities Fund Growth ₹610.825
↑ 6.23 ₹14,486 -1.6 14.8 46.7 18.9 21.6 32.5 Large & Mid Cap L&T Emerging Businesses Fund Growth ₹85.1292
↑ 0.86 ₹17,306 -2.1 12.8 39.7 25.5 30.3 46.1 Small Cap Aditya Birla Sun Life Small Cap Fund Growth ₹87.2187
↑ 0.41 ₹5,430 -3.3 11.4 34.1 16.5 23.4 39.4 Small Cap Kotak Standard Multicap Fund Growth ₹80.107
↑ 0.54 ₹53,844 -4.3 7.3 33.9 14.6 17.1 24.2 Multi Cap Motilal Oswal Multicap 35 Fund Growth ₹60.4813
↑ 0.29 ₹12,564 5.3 20.6 56.1 20 17.5 31 Multi Cap Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 29 Oct 24
Fund NAV Net Assets (Cr) 3 MO (%) 6 MO (%) 1 YR (%) 3 YR (%) 2023 (%) Debt Yield (YTM) Mod. Duration Eff. Maturity Sub Cat. Aditya Birla Sun Life Medium Term Plan Growth ₹36.7661
↑ 0.04 ₹1,921 3.8 7 10.9 13.6 6.9 7.73% 3Y 10M 6D 5Y 1M 10D Medium term Bond Aditya Birla Sun Life Government Securities Fund Growth ₹77.7351
↑ 0.12 ₹2,259 2 5.7 10.7 5.9 7.1 6.92% 9Y 11D 18Y 10M 2D Government Bond Nippon India Gilt Securities Fund Growth ₹36.3931
↑ 0.05 ₹1,986 2.1 5.5 10.4 5.7 6.7 6.95% 9Y 29D 19Y 7M 6D Government Bond Canara Robeco Gilt Fund Growth ₹72.3167
↑ 0.13 ₹121 2.1 5.4 10.3 5.7 6.5 6.91% 8Y 9M 5D 21Y 7M 9D Government Bond SBI Magnum Gilt Fund Growth ₹62.9811
↑ 0.11 ₹10,626 2.1 5.7 10.1 6.9 7.6 6.96% 9Y 6M 22D 23Y 5M 12D Government Bond Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 29 Oct 24
Fund NAV Net Assets (Cr) 3 MO (%) 6 MO (%) 1 YR (%) 3 YR (%) 2023 (%) Debt Yield (YTM) Mod. Duration Eff. Maturity Sub Cat. Aditya Birla Sun Life Corporate Bond Fund Growth ₹106.782
↑ 0.06 ₹23,109 2.2 4.7 8.9 6.4 7.3 7.49% 3Y 9M 18D 5Y 7M 13D Corporate Bond HDFC Corporate Bond Fund Growth ₹30.8073
↑ 0.01 ₹31,301 2.2 4.7 8.8 6.1 7.2 7.48% 3Y 8M 26D 5Y 10M 6D Corporate Bond HDFC Banking and PSU Debt Fund Growth ₹21.7782
↑ 0.01 ₹5,748 2 4.3 8.2 5.8 6.8 7.42% 3Y 7M 28D 5Y 4D Banking & PSU Debt UTI Banking & PSU Debt Fund Growth ₹20.7607
↑ 0.01 ₹824 1.9 4.2 8.1 8 6.7 7.28% 2Y 5M 23D 2Y 11M 12D Banking & PSU Debt PGIM India Short Maturity Fund Growth ₹39.3202
↓ 0.00 ₹28 1.2 3.1 6.1 4.2 7.18% 1Y 7M 28D 1Y 11M 1D Short term Bond Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 29 Oct 24
Fund NAV Net Assets (Cr) 3 MO (%) 6 MO (%) 1 YR (%) 3 YR (%) 2023 (%) Debt Yield (YTM) Mod. Duration Eff. Maturity Sub Cat. Aditya Birla Sun Life Savings Fund Growth ₹520.59
↑ 0.11 ₹12,417 1.9 3.7 7.7 6.4 7.2 7.78% 5M 19D 7M 24D Ultrashort Bond Indiabulls Liquid Fund Growth ₹2,410.47
↑ 0.45 ₹190 1.8 3.5 7.4 6 6.8 7.12% 1M 29D Liquid Fund Principal Cash Management Fund Growth ₹2,200.27
↑ 0.42 ₹5,396 1.7 3.5 7.3 6.2 7 7.18% 1M 28D 1M 28D Liquid Fund PGIM India Insta Cash Fund Growth ₹324.525
↑ 0.06 ₹516 1.7 3.5 7.3 6.2 7 7.21% 1M 24D 1M 28D Liquid Fund JM Liquid Fund Growth ₹68.0758
↑ 0.01 ₹3,157 1.7 3.5 7.3 6.1 7 7.14% 1M 18D 1M 22D Liquid Fund Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 29 Oct 24
The above can be used as a guidance given the type of investor one is. The proposed asset allocation also gives a projection as to the expected annual return per annum and the expected variation in returns (annual standard deviation).
Let’s, for example, take the individual here is aggressive and hence the equity allocation to be 60%. So proposed investment allocations would be (for an investment of 10 lakhs):
Equity (60%) = 6 lakhs
Debt (30%) = 3 lakhs
Gold (10%) = 1 lakh
One should try and do some research to get a good scheme. Various rating agencies like CRISIL, Value research, Morningstar etc. provide funds ratings. Using these ratings and getting some top performing funds would ensure that we try and select good performing funds into the portfolio.
In the example,
Monitoring your investment is a critical step and one should review the portfolio at least once a quarter and rebalance at least once a year. Also, looking at scheme performance is also important and if there are performance issues one should replace the scheme with a better performing one (also taking into account the tax considerations).
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These are the basic steps to create an investment plan for any sum of money. Hope this gives some direction to create an investment plan for a secured future. Happy investing!
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