The only thing permanent in life is change. Times change. People change. So does life. You expect life to be much better tomorrow than it is today. Tomorrow, you hope to fulfil all your dreams and aspirations. But what happens if things take an untoward turn? Or, if there is an eventuality? Perhaps it's time for you to change the way you plan your investments...

All of us are not born with a silver spoon in our mouth. But each one of us wish to strike gold and has a desire to be rich. There is a constant urge in us to make our money grow at a pace that not only provides for our financial goals but also helps us to improve our standard of living from good to better.

This makes it really essential for all of us to plan the allocation of our available finanacial resources in such a way that we can generate the maximum possible return. The term 'allocation of resources' means putting your money in the various asset classes such as debt, equity and cash.

Investment planning

Risk

How to start

Everyone needs to save for a rainy day. Once you have saved enough to take care of emergencies, you should start thinking about investing and to make your money grow. We can help you plan your investments so that you can reap adequate benefits and achieve your financial goals. Investment planning is necessary for every one who wishes to achieve any financial goal. You have to plan your limited resources to avail the maximum benefit out of them. You should plan your investments to fulfill major needs like:

• Creating wealth over the long term
• Acquring assets like a dream house or a dream car
• Fulfulling your need for financial security

Importance

Investment means putting your money to work to earn more money. Done wisely, it can help you meet your financial goals like buying a new house, paying for college education of your children, of your enjoying a comfortable retirement, or whatever is important to you. You do not have to be wealthy to be an investor. Investing even a small amount can produce considerable rewards over the long-term, especially if you do it regularly. But you need to decide about how much you want to invest and where . To choose wisely, you need to know the investment options thoroughly and their relative risk exposures.

Best investment option

The choice of the best investment options for you will depend on your personal circumstances as well as general market conditions. For example, a good investment for a long-term retirement plan may not be a good investment for higher education expenses. In most cases, the right investment is a balance of three things: Liquidity, Safety and Return.

Liquidity - how accessible is your money?

How easily an investment can be converted to cash, since part of your invested money must be available to cover financial emergencies.

Safety - what is the risk involved?

The biggest risk is the risk of losing the money you have invested. Another equally important risk is that your investments will not provide enough growth or income to offset the impact of inflation, which could lead to a gradual increase in the cost of living. There are additional risks as well (like decline in economic growth). But the biggest risk of all is not investing at all.

Return - what can you expect to get back on your investment?

Investments are made for the purpose of generating returns. Safe investments often promise a specific, though limited return. Those that involve more risk offer the opportunity to make - or lose - a lot of money. To a large extent, the choice of the right investment option will also depend upon your financial goals. For example, if you want to invest for funding your vacation next year, don't choose an investment vehicle that has a three-year lock-in. Similarly, if you want to invest for your daughter's marriage after 10 years, don't invest in 1yr bonds for the next 10 years. Instead, choose an option that matches your investment horizon

Risk and returns go hand in hand. Higher the risk, higher is the possibility of earning a good return. Thus, it follows that all types of investment have some form of risk attached to it. Theoretically, even 'safe' investments (such as bank deposits) are not without some element of risk. Broadly, here are the various types of risks that you might have to face as an investor.

Credit Risk

The risk is that the issuer of the security will default, or not repay the principal amount. This is valid for corporate bonds etc.

Liquidity Risk

If you invest in securities, stocks, bonds, you are risking their sellability. In other words, your money gets stuck unnecessarily, creating an asset-liability mismatch.

Market Risk

Financial markets are volatile in nature. Volatility means sudden swings in value from high to low, or the reverse. The more volatile an investment is, the more profit or loss you can make, since there can be a big spread between what you paid and what you sell it for. But you also have to be prepared for the price to drop by the same amount. Those who invest in stocks and mutual funds typically run this risk.

Interest Rate Risk

Depending on the interest rate movement in the economy, the rates of interest investment instruments may go up or come down, resulting in a subsequent reverse movement of their prices. Such a scenario of economic instability might effect mutual funds etc. The whole idea behind investment planning is to evaluate the risk associated with various type of investments and take steps so as to balance it with the desired return.

All of us are not born with a silver spoon in our mouth. But each one of us wish to strike gold and has a desire to be rich. There is a constant urge in us to make our money grow at a pace that not only provides for our financial goals but also helps us to improve our standard of living from good to better.

This makes it really essential for all of us to plan the allocation of our available finanacial resources in such a way that we can generate the maximum possible return. The term 'allocation of resources' means putting your money in the various asset classes such as debt, equity and cash.

However, this cannot be done by following an ad-hoc approach to investments. One is required to plan investments in a systematic manner so that he gets maximum returns with minimum risk. Also, the allocation should be regularly reviewed at periodic intervals. For this, one can either plan investments oneself, or refer to an expert (a Financial Planner) who not only helps you invest appropriately but also monitors the performance of your portfolio so that you do not miss on the best opportunities available in terms of investing and also do not take undue risk on your portfolio. A financial planner will give meaning to your investments by linking the same to your financial goals. This way one would know where one is going and it will become easier to chart out an appropriate path way towards the relevant destination point.

An investment decision is a trade off between the risk & return. Howvever, the investment avenue will definitely depend upon certain factors. Some of the questions you need to answer are:

• What is your age?
• How many dependents do you have?
• What are your financial goals?
• How much money would you need to fund each goal?
• What is the time horizon of your goals?
• How much are you concerned about liquidity?
• What is yor risk profile?

All these questions will help your advisors to chalk out a plan which can match the suitable products with your goals. Your need could be:

• Investment Planning
• Tax Planning
• Children's Future Planning
• Cash flow Planning
• Insurance Planning
• Retirement Planning