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Best Investment Plan: How to Create a Financial Plan?

Updated on January 17, 2019 , 207 views

The best Investment plan is a Financial plan that gives us an opportunity to save money for our 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 the best investment plan with high returns or a short-term investment plan with minimal returns depending on 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.

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Best Investment Plan: How to Create?

The basic steps in creating an investment plan are as follows:

Investment-Plan

Let me try to explain each step mentioned above:

STEP 1: Risk Assessment

One needs to understand his or her risk profile here for investing. Risk profile would depend on various factors such as:

  • Age
  • Cash flows (salary, recurring income etc.)
  • Dependents
  • Ability to tolerate the loss
  • Requirement of cash/money in the near term
  • There are basic questionnaires that take an individual through this process and ultimately give a number or a rating which give the risk rating of an individual. The risk rating could be like:
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.

STEP 2: Asset Allocation

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.

Best Mutual Funds for Aggressive Investors

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)5 YR (%)2017 (%)Sub Cat.
Motilal Oswal Multicap 35 Fund Growth ₹24.753
↓ -0.16
₹13,2865.8-6.2-10.114.9 -7.8 Multi Cap
Kotak Standard Multicap Fund Growth ₹33.104
↓ -0.15
₹21,3695.3-0.8-2.416.319-0.9 Multi Cap
Principal Emerging Bluechip Fund Growth ₹99.63
↓ -0.34
₹2,0213-4.3-1217.523.4-11 Large & Mid Cap
Invesco India Growth Opportunities Fund Growth ₹32.39
↓ -0.04
₹9694-2-2.415.416.4-0.2 Large & Mid Cap
DSP BlackRock Equity Opportunities Fund Growth ₹207.463
↓ -0.92
₹5,5504.5-1-9.914.916.8-9.2 Large & Mid Cap
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 18 Jan 19

Best Mutual Funds for Moderately Aggressive Investors

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)2017 (%)Debt Yield (YTM)Mod. DurationEff. MaturitySub Cat.
Reliance Gilt Securities Fund Growth ₹24.1858
↓ -0.05
₹8873.85.47.69.287.65%4Y 9M 29D6Y 6M 22D Government Bond
ICICI Prudential Gilt Fund Growth ₹62.5234
↑ 0.00
₹1,0442.64.17.29.16.86.97%1Y 9M 25D2Y 6M 25D Government Bond
Aditya Birla Sun Life Government Securities Fund Growth ₹51.0413
↓ -0.05
₹2024.15.16.99.36.97.73%6Y 14D8Y 11M 5D Government Bond
Axis Strategic Bond Fund Growth ₹17.8132
↓ 0.00
₹1,2432.746.88.76.79.85%1Y 10M 24D2Y 4M 24D Medium term Bond
UTI Gilt Fund Growth ₹39.775
↓ -0.05
₹4962.53.55.98.66.37.05%1Y 9M 4D2Y 6M 7D Government Bond
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 18 Jan 19

Best Mutual Funds for Moderately Conservative Investors

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)2017 (%)Debt Yield (YTM)Mod. DurationEff. MaturitySub Cat.
Aditya Birla Sun Life Corporate Bond Fund Growth ₹70.1901
↑ 0.01
₹12,5362.84.47.2878.59%1Y 9M 14D2Y 4M 17D Corporate Bond
UTI Banking & PSU Debt Fund Growth ₹14.9981
↓ 0.00
₹7942.546.98.26.88.48%9M 4D10M 17D Banking & PSU Debt
HDFC Corporate Bond Fund Growth ₹20.2983
↓ 0.00
₹11,2852.94.26.67.96.58.69%2Y 1D2Y 7M 2D Corporate Bond
HDFC Banking and PSU Debt Fund Growth ₹14.7145
↓ 0.00
₹2,7293.14.26.17.75.99%2Y 3M 7D2Y 10M 19D Banking & PSU Debt
DHFL Pramerica Short Maturity Fund Growth ₹33.1175
↓ -0.01
₹8312.23.25.77.55.510.53%1Y 3M 4D1Y 7M 17D Short term Bond
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 18 Jan 19

Best Mutual Funds for Conservative Investors

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)2017 (%)Debt Yield (YTM)Mod. DurationEff. MaturitySub Cat.
Franklin India Ultra Short Bond Fund - Super Institutional Plan Growth ₹25.7839
↑ 0.01
₹14,7002.94.898.98.70%6M 17D Ultrashort Bond
Aditya Birla Sun Life Savings Fund Growth ₹362.913
↑ 0.07
₹14,9492.44.27.98.17.68.4%5M 8D6M 4D Ultrashort Bond
DHFL Pramerica Insta Cash Fund Growth ₹238.505
↑ 0.05
₹3,3601.93.87.57.37.47.14%1M 6D1M 6D Liquid Fund
JM Liquid Fund Growth ₹50.2257
↑ 0.01
₹2,2771.93.87.57.37.47.27%12D12D Liquid Fund
Indiabulls Liquid Fund Growth ₹1,788.93
↑ 0.35
₹2,0881.83.77.37.37.36.86%1M 5D1M 6D Liquid Fund
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 18 Jan 19

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).

STEP 3: Product Selection

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,

  • For equity one can choose a mix of large-cap and mid-cap
  • Debt can be spread into a mix of long term and short term
  • For gold, one can use gold ETF based Mutual Funds

STEP 4: Monitoring & Re-Balancing of Mutual Funds

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).

How to Invest in Mutual Funds Online?

  1. Open Free Investment Account for Lifetime at Fincash.com.

  2. Complete your Registration and KYC Process

  3. Upload Documents (PAN, Aadhaar, etc.). And, You are Ready to Invest!

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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!

Disclaimer:
All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.
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