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How to Make an Investment Plan

Creating an investment plan demands vigilance – regularly monitoring your portfolio, adjusting as needed, and remaining composed during market fluctuations.

  • 4,232 Views | Updated on: Apr 03, 2024

Designing the best investment plan takes more than just opening a savings account, purchasing a few stocks, or investing in commonly sought-after financial instruments like mutual funds. To create a suitable investment plan, it is critical to understand where you are now, your current financial condition, your future ambitions, and what you want to achieve with your investments.

To determine your best asset allocation, you must specify your needs and how much risk you are ready to take. Of course, it is extremely prudent to plan ahead of time before investing your hard-earned money. Though it is best to start early, you may still establish and implement a personal investment strategy and begin building a future nest egg if you are in your late 40s or 50s.

What is an Investment Plan?

An investment plan is your roadmap to achieving your financial goals through smart and strategic allocation of your savings. It is your personalized blueprint for growing your wealth over time, considering your:

  • Goals: Whether it is retirement, a down payment, or financial security, knowing your target keeps you focused.
  • Risk tolerance: How comfortable are you with potential losses for higher returns? This steers your asset choices.
  • Timeline: Are you saving for the short term or the long haul? Time horizon influences investment types.

How to Make an Investment Plan?

Regardless of the phase of life you enjoy, this well-formulated, step-by-step investment planning guide can aid you in making the most of your money.

A complete, step-by-step guide on making a long-lasting investment plan

Step 1: Examine Your Current Financial Circumstances

The first step of an investing plan should be to figure out where you are financially right now. You must understand the amount you need to invest. One way to achieve this is by making a budget to examine your disposable income after expenses and emergency reserves. It is also crucial to examine how liquid or accessible your investments must be. For instance, if you need to cash out instantly, you should consider liquid assets, such as stocks, instead of real estate.

Step 2: Define Your Financial Objectives

The next stage is to establish your financial goals. Why do you need this investment? What do you aim to achieve with it? Your objectives can be categorized into safety, income, and growth. You can divide your goals into three categories:

  • Short-term goals (1-3 years): Saving for a down payment, car, or vacation.
  • Mid-term goals (3-5 years): Building an emergency fund paying off student loans.
  • Long-term goals (5+ years): Retirement, children’s education, buying a second home.

When you want to maintain your present level of wealth, income is what you want from your assets, and growth is what you want from your investments if you want to develop wealth over time. You may decide your ideal investing strategy based on which categories your goals fit into.

Step 3: Determine Your Risk Tolerance

The next step is determining how much risk you are ready to accept. Because your portfolio has time to recover from losses, the younger you are, the more risk you may take. Since riskier investments offer the potential for huge gains and significant losses if you intend to create money over time, opt for a safer option. You can invest as per your risk tolerance, which can be categorized as:

  • Conservative: Prioritize stability and minimize potential losses. Suitable for shorter investment horizons or individuals nearing retirement.
  • Moderate: Willing to accept some risk for potentially higher returns. Suitable for investors with a longer time horizon and diversified portfolio.
  • Aggressive: Seek high returns with a higher risk of loss. Suitable for young investors with a long time horizon and high-risk tolerance.

Step 4: Decide on Where You Want to Invest

The list of investment plans in India is endless. Your budget, goals, and risk tolerance play a role in determining the best investment plan with high returns. Ensure that you diversify your portfolio regardless of the plan you decide to invest in. This is because you do not want to invest all your money in stocks and risk losing it if, for example, the stock market crashes. To maximize your growth and stability, allocate your funds to a few different investment kinds that align with your goals and risk tolerance.

It may be necessary to seek a financial counselor’s advice once you reach this point in the procedure. Based on your existing financial status and goals, an advisor can assist you in determining the best methods to invest your money.

Step 5: Keep an Eye on Your Investments and Rebalance Them if Necessary

It is not good to leave your investments alone once you have made them. Instead, you should check in on your investments now and again to see how they are doing and whether you need to adjust. Once you have determined your investment strategy is sound, you should consider rebalancing your portfolio. This entails restoring your portfolio’s asset allocation to its original state. For example, consider when your stock investments outperformed the rest of your portfolio. To maintain optimal asset allocation, selling some of your stocks and shifting the proceeds to other investment kinds may be necessary.

If this is your first time formulating the best investment plan, do not worry about gaining experience; concentrate on learning about the various investments. You should also think about all possible investment plans with which you could put your money to the best use. Then, understand your needs and invest in a plan that best suits your plans and financial goals.

What are the Various Types of Investment Plans in India?

Choosing the right investment plan in India depends on your unique financial goals and risk tolerance. Some popular options for investment in India are:

Low-Risk Plans

As the name suggests, these plans come with a low risk of investment and can be adopted by individuals who do not have high-risk tolerance:

  • Public Provident Fund (PPF): A long-term investment with guaranteed returns and tax benefits. Ideal for retirement planning.
  • National Pension System (NPS): Another long-term option with market-linked returns and tax benefits. Good for retirement corpus building.
  • Bank Fixed Deposits (FDs): Offer low-risk predictable returns, suitable for short-term goals or parking emergency funds.
  • Senior Citizen Savings Scheme (SCSS): High-interest scheme exclusively for senior citizens, perfect for regular income generation.
  • Post Office Monthly Income Scheme (MIS): Provides fixed monthly income with the safety of government backing.

Moderate-Risk Plans

These plans come with a moderate risk. Different types of moderate risk plans are:

  • Mutual Funds: Professionally managed investment baskets offering diverse exposure to stocks, bonds, or other assets. Good for medium-term goals.
  • Bonds: Debt instruments issued by governments or companies, offering fixed interest payments at moderate risk.
  • Gold Bonds: A safe haven investment with capital appreciation potential, although returns are not guaranteed.

High-Risk Plans

High-risk plans are excellent for people ready to dive deeper into investments and tolerate market uncertainties. Some of the popular high-risk plans are:

  • Direct Equity: Investing in individual company stocks for potentially high returns but with significant risk of capital loss.
  • Real Estate: Can generate rental income and long-term capital appreciation but requires significant upfront investment and carries market risks.
  • Small & Midcap Funds: Invest in smaller companies with higher growth potential and volatility.

Difference Between Various Investment Plans

Diversification across asset classes is crucial to manage risk and optimize returns. Here is a comparison of investment options based on risk levels:





Target Investment Horizon

5+ years (tolerant of short-term volatility)

3-5 years or longer

Short-term to long-term (prioritize capital preservation)

Potential Returns

High, with possibility of significant capital appreciation, but also potential for substantial losses

Moderate, with possibility of beating inflation and some capital appreciation

Low, but predictable and guaranteed (in some cases)


High, expect significant fluctuations in value

Moderate, expect some fluctuations but overall less volatile than high-risk

Low, value changes slowly and predictably


Can be less liquid, depending on the investment (e.g., direct equity)

Generally more liquid than high-risk options

Highly liquid, easily accessible when needed


Young investors with long time horizons and high risk tolerance seeking high potential returns

Investors seeking a balance between growth and stability, suitable for various goals

Risk-averse investors, retirees, or those prioritizing capital preservation and stable income


Small & Midcap Funds, Sectoral Funds, Direct Equity, Options Trading

Balanced Mutual Funds, Dynamic Bond Funds, Short-duration Debt Funds, REITs

Public Provident Fund, National Pension System, Bank Fixed Deposits, Senior Citizen Savings Scheme, Post Office Monthly Income Scheme

Way Forward

The selection of the right investment plan in India hinges on individual goals and risk appetite. Options span from low-risk plans like PPF and NPS for guaranteed returns to moderate-risk choices such as mutual funds and bonds and high-risk opportunities like direct equity and real estate. Constructing an effective investment plan is not a one-time endeavor but an ongoing commitment to financial well-being. By sticking to your investment plan and remembering what you are saving for, you can make smart choices and grow your money over time.

Key Takeaways

  • Identifying specific financial goals (e.g., retirement, a house) and assessing your comfort level with risk is crucial.
  • To minimize risk and optimize returns, it is essential to diversify investments across various assets such as stocks, bonds, and real estate.
  • You can invest in high-risk, low-risk, and moderate-risk investment plans depending on your risk tolerance.
  • Regardless of the chosen investment plan, you can always diversify to maximize growth and stability.



How do I make my own investment plan?

Define your goals & risk tolerance (retirement? house? how much risk?), research & choose investments (stocks, bonds, etc.). Set asset allocation (how much in each type) and monitor & adjust regularly.


What is an investment plan example?

If your goal is retirement in 20 years, moderate risk. You can have assets with 60% stocks, 30% bonds, 10% cash. You need to review your assets every quarter and adjust as needed.


Which plan is best for investment?

There’s no “best” plan - it depends on your goals and risk tolerance. Diversify across assets to manage risk.


How to start a portfolio?

To start a portfolio, open an investment account and choose a few low-cost, diversified funds. Do not forget to invest regularly, even in small amounts.


Can I invest my own money?

Absolutely! Do your research, start small, and consider seeking professional advice if needed.


What is a good portfolio?

A good portfolio matches your goals and risk tolerance and is diversified across different assets.


What is a portfolio formula?

For a better portfolio, one must use asset allocation models based on your risk tolerance and time horizon.


How to calculate risk return?

Analyze the historical performance and volatility of different assets and potential portfolio combinations.


What is the risk of a portfolio?

Portfolio risk depends on the assets and their proportions. Diversification reduces overall risk.


How do I calculate my portfolio?

Track your investments and their values, then analyze your overall asset allocation and risk profile.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

In this policy, the investment risk in the investment portfolio is borne by the policyholder.

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