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How to Create an Investment Plan?

Updated on April 9, 2024 , 28236 views

“Save for a rainy day” is a practical truth. When you make an Investment plan, you not only save for bad times, but also secure your future.

Each of us has certain goals, dreams, aspiration & wish list, and making all these possible is achievable if you know the importance of an investment plan.

Basis this, we take you through a guideline, on how to create an investment plan in a systematic manner. But, before that let us understand the importance of Investing.

Why Should you Invest?

Many people today still Fail to understand the importance of investing. Well, the main idea behind investing or making an investment is to generate a regular Income or returns over a specified time period. Moreover, it makes you prepare for your future in an orderly way. But, people do invest their money for various reasons such as for retirement, to make a short term and long term investment (as per their goals), for the purchase of assets, for undertaking marriage, for starting a business or for going for a world tour etc.

Tips to Make Best Investment Plan

1. Determine Your Risk Tolerance

When making an investment plan, it's important to determine your risk tolerance. Every investing option has its own pros and cons. Some vehicles come with low risks, while some others have a high level of risks. In financial terms, a risk is defined as the Volatility or fluctuations of returns provided by an investment asset. While talking about the risk, the reward comes into the picture because risks and rewards go hand in hand. For example, the reward in Equity Funds is higher and so is the risk. However, having a diversified Portfolio of assets reduces the risks.


So, before investing in any instrument, know it’s both sides. Along with that determine your risk tolerance too. Few of the examples are mentioned below in the image.

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2. Set Financial Goals

The first thing you do while creating an investment plan is setting Financial goals! We all want to be financially stable and need a steady flow of income. But, many people underestimate their power of being financially stable, assuming that it's only for the rich ones. But hold on, being rich is not about how much you earn, but it’s about how much you save! One such way to reach is by making a Financial plan and setting financial goals.

One of the systematic ways to target your financial goals is by setting them into time frames, i.e., short-term, mid-term and long-term goals. This will not only give a very systematic solution to the journey of the desired financial goal but also achieve a realistic approach towards your financial goals. Whether you want to own a car, invest in Real Estate/gold or save for marriage - whatever be the financial goal; you can target them by categorising them foremost into the aforementioned time frames namely - short, medium and long-term. However, to make all these possible, you need to save first!

3. Decide Investment Surplus

While estimating the investment surplus, investors must clearly understand their current financial state which will give them an idea about both their Earnings and expenses. This analysis will guide you through your annual cost of living and indicate the savings or surplus money available for investment.

4. Decide Asset Allocation

Asset Allocation is simply deciding the mix of assets in a portfolio. It is important to realise the importance of having different asset classes in a portfolio. It is necessary to have sufficiently uncorrelated assets in a portfolio so that when an Asset Class doesn’t earn, the others to give the investor a positive return on the portfolio.

While there are many traditional ways of building assets like various schemes, fixed deposits, savings, etc., people need to also understand the importance of other unconventional ways of building assets faster. Moreover, investing in things which will appreciate in value and give you good returns for your money. For example, Mutual Funds, commodities, real estate are some options which will appreciate with time and it will help you in building a strong portfolio.

5. Monitor and Re-Balance

Investors should always review the portfolio at least once a quarter and rebalance at least once a year. One would need to see scheme performances and should make sure that a good performer exists in the portfolio. Else one would need to change their holdings and replace laggards with good performers.

Check Best Investment Options to Invest

What adds to the important side of investing in the right instruments! Many people think that keeping their money just in Bank accounts pay them a good interest. But there are many other options besides parking money in banks, wherein you can invest your money to gain better profits and returns. To mention some, there are various Types of Mutual Funds (Bonds, debt, equity), ELSS, ETFs, Money market funds, etc. So, choose the options well and make a Smart investment plan!

Your investment plan should hold the best performing investing instruments. So know some, we have listed off a few best options to invest money!

Investment Options Average Returns Risk
Bank Accounts/Fixed Deposit 3%-10% Very Low to None
Money Market Funds 4%-8% Low
Liquid Funds 5%-9% Very Low to None
Equity Funds 2%-20% High to Moderate
Equity Linked Savings Scheme (ELSS) 14%-20% Moderate

Best Money Market Funds to Invest

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)2023 (%)Debt Yield (YTM)Mod. DurationEff. MaturitySub Cat.
L&T Money Market Fund Growth ₹24.1626
↑ 0.01
₹1,18223. 18D8M 5D Money Market
Aditya Birla Sun Life Money Manager Fund Growth ₹338.052
↑ 0.15
₹19,2312. 20D4M 20D Money Market
Kotak Money Market Scheme Growth ₹4,103.97
↑ 1.81
₹16,4892. 23D8M 23D Money Market
ICICI Prudential Money Market Fund Growth ₹346.631
↑ 0.15
₹15,5312. 1D3M 10D Money Market
UTI Money Market Fund Growth ₹2,815.76
↑ 1.37
₹13,07023. 10D5M 10D Money Market
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 12 Apr 24

Best Liquid Funds to Invest

FundNAVNet Assets (Cr)1 MO (%)3 MO (%)6 MO (%)1 YR (%)2023 (%)Debt Yield (YTM)Mod. DurationEff. MaturitySub Cat.
Aditya Birla Sun Life Liquid Fund Growth ₹386.818
↑ 0.07
₹43,9620. 10D1M 10D Liquid Fund
Nippon India Liquid Fund  Growth ₹5,861.12
↑ 1.12
₹35,4190. 8D1M 12D Liquid Fund
Principal Cash Management Fund Growth ₹2,118.97
↑ 0.39
₹5,4130. 2D1M 2D Liquid Fund
Indiabulls Liquid Fund Growth ₹2,320.99
↑ 0.42
₹1910. 3D Liquid Fund
JM Liquid Fund Growth ₹65.5745
↑ 0.01
₹1,6280. Liquid Fund
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 12 Apr 24

Best Equity Funds to Invest

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)5 YR (%)2023 (%)Sub Cat.
DSP BlackRock Natural Resources and New Energy Fund Growth ₹86.628
↑ 1.08
₹95716.434.653.223.921.731.2 Sectoral
L&T Emerging Businesses Fund Growth ₹72.8095
↓ -0.22
₹13,7474.618.252.532.424.346.1 Small Cap
IDFC Infrastructure Fund Growth ₹45.21
↓ -0.24
₹1,00918.23978.633.524.750.3 Sectoral
Aditya Birla Sun Life Banking And Financial Services Fund Growth ₹52.03
↓ -0.22
₹3,0233.39.234.417.312.521.7 Sectoral
Aditya Birla Sun Life Small Cap Fund Growth ₹75.6725
↓ -0.44
₹5,3823.114.551.119.716.839.4 Small Cap
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 10 Apr 24

Best ELSS Funds to Invest

FundNAVNet Assets (Cr)3 MO (%)6 MO (%)1 YR (%)3 YR (%)5 YR (%)2023 (%)Sub Cat.
Tata India Tax Savings Fund Growth ₹38.5274
↓ -0.28
₹4,0165.616.436.318.416.624 ELSS
IDFC Tax Advantage (ELSS) Fund Growth ₹139.776
↓ -1.24
₹6,1407.718.441.82220.228.3 ELSS
DSP BlackRock Tax Saver Fund Growth ₹116.298
↓ -0.86
₹14,1477.421.744.120.819.530 ELSS
L&T Tax Advantage Fund Growth ₹112.958
↓ -0.50
₹3,68010.123.544.618.316.328.4 ELSS
Aditya Birla Sun Life Tax Relief '96 Growth ₹52.07
↓ -0.53
₹15,0066.216.735.411.110.618.9 ELSS
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 12 Apr 24

While creating an investment plan, look for different investing options, investors should also be aware of new schemes in the market. Most importantly, they should get into the habit of early investment by securing their hard earned money!

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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