How must you plan your Investing

You could be investing, keeping in mind the different goals that you have . Your goals could be Short,Medium or Long term in nature depending on the time you have in hand to finally reach your goal

But, no matter what kind of goals you may have , your investment must be spread across different investments type or very simplistically must be spread across at least Debt and Equity.

• Short Term Investment Horizon ( 1 year )

            Debt : Bank Fixed Deposits and FMP and Balanced Funds

            Equity : Large cap Focused Diversified Equity Funds

• Medium Term Investment Horizon ( 3-5 year )

           Debt : Bank FDs, Corporate FDs , Debt Mutual Fund

           Equity : Large Cap and Mid Cap Focused Diversified Equity Funds

• Long Term Investment Horizon ( > 5 year )

         Debt : Bank/Corporate  FDs,PPF/PF,Long Tenure Bonds

         Equity : Large Cap Focused Diversified Equity Funds ,

                     Mid/Small Cap Focused Diversified Equity Funds

                     Direct Exposure to Equity.

You can add Gold to all of these for stability .

As the saying goes, "Failing to Plan is Planning to Fail" , so lets be prudent and plan

Image: renjith krishnan / FreeDigitalPhotos.net

Why is Investing important

If you have been able to save money and have been able to spend less than what you earn, that is great, you have taken a tiny step towards wealth creation, since you could never have hoped to create wealth by spending more than you earn.


The question that now begs to be answered is, is just saving enough.

Let me explain

I usually have Idlies for breakfast, about two years back my breakfast costed me Rs.10 and today the same breakfast costs me Rs.14.

Now If,

· I had saved Rs.10 as cash, I would have found after two years that my Rs.10 would no more be able to buy me the breakfast.

· I had kept this Rs.10 in a savings bank account that which gives me a interest of 3.5 % a year, I would have got Rs.0.35 the first year and another Rs.0.35 the next, so ideally I would have ended up having Rs.10.70, which would still not buy me my normal breakfast.

Which just shows that, saving thought extremely important is just not sufficient, it must be backed by a push to invest, else rise in Prices (Inflation) eats into our purchasing power, reducing the value of money.

If you see all great wealth creators, the one consistent thing you find is that, they have learnt to make their money work harder, they have learnt, left on its own money would start loosing value hence it is a far better proposition to convert money into Stocks, Bonds, Real Estate, Businesses, Gold, etc.

Do work hard , but also learn to make your money work harder .