The difference between financial planning and investment planning
The difference between financial planning and investment planning

Financial planning is the most crucial process of every individual’s life, you are no different. Proper and efficient financial planning leads to a secure financial future, helping you build a good retirement corpus.

Financial planning generally refers to a comprehensive evaluation of your current and future financial position, which is crucial for you as an investor. It helps you in predicting future cash flows, investment asset values, and retirement corpus withdrawal plans. Strong financial planning includes elements such as savings, investment in stocks, equity portfolio management, cost budgeting, life and health insurance, tax planning, estate planning, and of course, retirement are corpus planning. Financial planning includes investment planning and not vice versa.

Financial planning helps you assess every minute aspect of your financial life. Thus, it supplements your overall investment strategy to achieve your long-term financial goals such as buying a home, planning children’s education, and retirement corpus, and short-term financial goals such as planning a foreign vacation and buying a new car.

Most people prefer doing financial planning themselves as they are comfortable drawing up plans and executing investment strategies. However, taking help from a professional financial planner can make a big difference to your overall plans. These experts will align your investment strategy with your risk profile and financial goals. They will assist you at every step to ensure you are on track to achieve your financial goals.

Investment planning is a different cup of tea altogether. It is a major part of financial planning but is not financial plans per se. Investment planning involves drawing out a comprehensive investment plan in sync with your financial plan and risk profile to help you create the required corpus to achieve your financial objectives. Underinvestment planning, based on your risk propensity, you will be diversifying your money into different asset classes by making an investment in stocks, exchange-traded funds, mutual funds investment, systematic investment plan, and national pension scheme (NPS). Other asset classes that you could allocate your investments to include IPO, CFD, NFO, ULIPs, and ELSS. The purpose of a good investment diversification strategy is to ensure that you maximize your returns over a long-term time horizon.

Given the high levels of stock market volatility and the expertise required to take timely investment calls, it is recommended that you seek the services of professional investment advisors. Generally, most top broking houses providing financial planning services also provide investment planning and guidance services to clients. They help you with stock recommendations, advisory services, company information, and much more. All this helps you make well-informed investment calls.

If financial planning is the end, then investment planning is the means to achieve the ideal end, which is the accomplishment of financial objectives laid down in your financial plan.  

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