Importance of Investment Planning

Importance of Investment Planning - Know More

The investment planning process chosen by our elders was buying precious metals like gold and silver or purchasing land. Though these were effective and slightly safer investments, things have changed over the years.

With banking institutions introducing their savings schemes and exposure to the share market, more doors for investment have opened up in India. Investment in shares and mutual funds has become one of the most trending things in the country. People have started investing a considerable amount of their income into mutual funds and stocks.

Further, the returns on these investments are used to invest in properties or other fields. It has formed a financial cycle that has inspired others to follow the same steps.

Importance of Investment Planning – The Need

1. Income

Investment is essential in your early years of life to find an additional source of income. Investors should analyze the market properly before investing. After this, invest in appropriate schemes to get maximum returns.

2. Safety

The main reason behind investment planning is to save money for your family and their future. It is advised to study the market properly before investing in any schemes.

3. Financial Backup

There are times when we face unforeseen events like a health emergency or financial problem. These investments come in handy in situations like these, proving as a financial backup.

4. Tax Reduction

The government of India offers several schemes under the Income Tax Act, 1961. These schemes allow a person to invest in government-listed products, which reduces their tax amount.

Steps for Investment Planning

1. Estimate your savings

Before you begin investing, it is vital to estimate your savings. Instead of investing all your savings, a person should divide their income accordingly. Any health or other emergency will require money for which you need immediate savings.

2. Set goals for your future

An investment is only worth it when you invest with a goal in your mind. Therefore, identifying your short-term and long-term goals is crucial to making the investment more credible. Short-term goals can be going on a vacation or buying some expensive gadget. On the other hand, long-term goals can be investing in purchasing a house, a luxury car, or your retirement plan.

3. Identifying your risk-taking ability

Before you start investing, you need to understand your risk-taking ability. It means how much loss you can handle while making investments in stocks or mutual funds.

4. Learn and then create

An investor needs to learn about all the investment options. Once you have done your homework, you can build a portfolio by investing in different options.

5. Divide your earnings to make assets

Your portfolio should be diversified so that if one investment fails, another one helps you out. You can opt for the allocation strategy and invest the allocated amount in that asset. Further, it helps in the smooth functioning of your portfolio, making it easier for you to track the details.


Over the years, people have shifted from keeping their money in banks to investing in other opportunities. Investment planning ensures that people invest their money wisely to enjoy their present and secure their future.

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