How to make an investment plan

How to make an investment plan

To make an investment plan is highly personalized. How much to save? How much to invest? Based on the feedback received so far, here is a step by step guide on how to create an investment plan. Based on a real-life situation, w will go through each and every stage.

Step 1 – Establish the saving needs

List the saving needs using a box framework (methodology explained earlier in Thumb Rules of Investing):

*can be considered as flexible goals

Step 2 – Make an investment plan

We must make some assumptions in this process:

  1. Income will continue and increase at 6% per annum
  2. Household expenses to increase in the rage of 6-8% while outflows like insurance premium etc. may not increase (at the same level). Therefore, consider an increase of 5% in expenses

With the above assumptions, below is a draft investment plan:

Key inferences:

  1. Create an emergency fund; the first year is Year ZERO
  2. Goal-based planning starts from Year 1
  3. Consider the future value of each of these goals assuming an average rate of return of 7% p.a. on investments
    1. How the future value calculations work – E.g. in the Target of Europe Travel Fund Rs 1.5 lacs invested per year will grow at 7% p.a. and become Rs 5 Lacs at the end of 3 years [Principal sum invested will be Rs 4.5 Lacs]
    2. Below is a detailed plan on investment
  4. Ensure savings as a % of income is maintained throughout the investment journey (are as per the guidance in my article Savings guide)

We do not want to recommend to exclude the below-listed items while preparing an investment plan. But, since these are very subjective and can significantly vary person by person, these have been excluded from our example for better illustration purpose:

  1. Parental assets inherited (e.g. house, antiques, precious stones, ornaments, etc.)
  2. Unforeseen medical expenses
  3. Income interruption
  4. Statutory contribution funds (Provident fund, Public Provident fund, etc.)
  5. Personal taxation or any kinds of taxes
  6. Any one-time cost or benefit that is person-specific

Step 3 – How to select mutual funds to fulfil your targets

To define a financial target and its timeline is one aspect of the planning process. Next mission is to make an investment plan to chase those targets. I have provided guidance on selecting mutual funds based on risk appetite and time-duration in my previous article (‘How to choose mutual funds’). Based on that, here are investment options that you can consider.

The above table is only indicative. Based on your understanding of the market trend, you can choose to modify the split.

The market movements influence your investment value. It is therefore essential to regularly assess the portfolio performance and progress towards the targets. Diligently crafted targets and investments may not require significant changes, but a regular assessment of fund performance is a must at least once a year.

Hope this article has facilitated you to gather the box framework concept and create an investment plan, identify investment options, review performance, and progress towards achieving your goals. Remember, investing is a complex subject, and you may need guidance from your financial advisor in this process.


The author of this article is a senior finance professional with over fifteen years of work experience in corporate finance and has an affinity towards the subject of personal finance and investment management. Please leave your comment or share thoughts on this article via email at For more articles, please visit the website


The article is based on the author’s knowledge, experience, and understanding of the subject. Any views, thoughts, and opinions expressed in the text belong solely to the author, and not necessarily to the author’s employer (past or current), organization, committee, or other group or individual.

Under no circumstances the author shall be liable for any views or analysis expressed in this note. Further, the views expressed are not binding on any authority or Court. Readers are advised to consult their financial advisor for advice for their specific case.

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