5 Tips To Plan Your Investments Better

Financial planning is important not just to pay off your debts on time but also to park your surplus funds in the right investment avenues. While platforms like Paisabazaar.com help you manage your debts and maintain a good credit score, finding the right investment can still be tricky. This is because investment planning is not just about finding the right option to put your money in. Instead, it involves considering your financial situation, your future goals, how much risk you are willing to take and most importantly determining your financial goals. Creating a plan will not only help you in investing but will also help you in finding the best investment option as per your needs and risk tolerance.

Here are some of the tips that will help you plan your investments better:

1. Review your financial situation

The first step while planning your investments is assessing your current financial situation. Before planning an investment, you must know how much money you have to invest. To do this, you should analyze your income, expenses and emergency fund, and check how much you can invest after all these expenses. This will help you decide how much amount you can afford to invest.

Besides this, it is also important to look at the different kinds of investment. For example, see whether you want your investments to be more liquid or you are ready to lock-in your funds for a longer tenure to get better returns. For liquid investments, stocks could be a better option rather than investing in insurance or real estate.

2. Set your financial goals

The next step while planning your investment is defining your financial goals. Deciding your financial goals involves questions like what are the reasons for investing? What are you hoping to earn money for? Your financial goal can be anything like buying a house or a car. Nevertheless, with financial goals, you must also decide your goal timeline. How quickly do you want to make money? Are you interested in long-term investment? These questions will help you find the right investment option for yourself.

While deciding your goals, you should categorize them into three categories, i.e., short-term, medium-term and long-term. Based on these categories, you need to find the right investment option. For instance, if you need to buy a car on EMI and your goal is to save money for the down payment, then you can choose investment options like mutual funds or stocks. On the other hand, if your goal is to improve your current level of wealth, you can choose life insurance or term insurance.

3. Determine your risk tolerance

Most of the investments come with risks. The investment risk is the likelihood that you might lose some or all the money you have invested. This can happen due to the falling value of your investment. Generally, the higher the risk of an investment, the higher the returns. Therefore, it is important to determine how much risk you are willing to take. Many factors like age, income, health, capacity to recover from the loss and others help you answer this question.

Each investor has different risk tolerance depending on the financial goals and the time frame. If you are someone who would be more likely to withdraw all the money even at a slight drop, then high-risk investments may not be the right choice for you. By figuring out how much risk you can tolerate, you can find the right set of investments for yourself.

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4. Decide what to invest in

The final step in planning your investment is deciding the right option as per your requirements and financial goals. You can invest in stocks, mutual funds, insurance, bonds, real estate and more depending on your goals.

However, if you are already an investor, you may also want to look at diversifying your portfolio, i.e., investing in multiple options. This is because you do not want to put all your money in stocks and risk losing everything with a drop in the stock market. It is advisable to put your money into different investment types that will help you achieve your goals according to your risk tolerance while maximizing your growth.

5. Monitor your investments

Once you have made your investments, you have to monitor them from time to time in order to maximize your returns. You should timely track your investments to check whether they are performing as per your financial goals or not. If your investments are not helping you to achieve your financial goals, you must reevaluate your investments and make necessary changes for your growth.

For instance, maybe you are not putting enough money every month in your investments to achieve your financial goal or maybe some low-risk investments are performing better and you want to put more money into such investments. Therefore, tracking the performance of your investments from time to time can help you decide whether to go with the same investment plan or need to make a few changes.

Being a good investor takes a lot of research and experience. You will get the experience by investing more and more according to your goals. If you are someone who has just started the journey of investment, then you must research thoroughly before putting your money into any kind of investment.