Know the important steps of the investment process

Discover key investment steps for success. From research to diversification, learn how to navigate the investment process effectively.
Important steps of the investment process
3 min

While conversing with friends or family, many conversations lead to investing and how it can help in building wealth over time. The idea is to save and invest the savings in various investment instruments to ensure your principal investment amount increases in value, allowing you to have an adequate amount to meet short-term and long-term expenses.

However, when it comes to investing, some people earn a good return on investment, while some incur losses. Why does this happen?

It all comes down to an effective investment process, which allows individuals to choose suitable investment instruments and create an effective financial plan. Although investment processes may be different based on multiple objectives, the main factors of approaching investments remain the same.

If you are looking for a safe investment option, you can consider fixed deposit. They offer guaranteed returns and a fixed interest rate throughout your investment tenure.

5 important steps of the investment process

Investing is an extensive process and requires careful consideration of numerous factors. For example, one may invest to have a corpus after retirement, while the other may invest to pay for their child’s education. However, these 5 steps of the investment process are crucial to ensure the most important factors are covered for a successful investment plan:

  1. Goal identification: Setting a goal is the foremost step. You have to ask yourself the ‘Why’ of investing. You may want to invest to buy a house, secure your child’s education, plan retirement, secure your family’s future, or for any other personal reason. Goal identification allows you to narrow down investment instruments based on the return on investment you want to earn during a specific investment period.
  2. Risk assessment: Every investment instrument comes with a set of risks. Hence, before investing, you must consider factors like age, financial situation, and investment timeframe to understand your personal risk appetite. Once you know how much risk you can take, you can narrow down investment options based on their associated risks.
  3. Asset allocation: Putting all your eggs in one basket is never a good option. Asset allocation allows you to choose different investment instruments and invest a portion of your investment amount in each of them. This ensures effective diversification and lowers the overall risk in case one asset class leads to losses.
  4. Investment selection: There are hundreds of investment instruments within the available asset classes. Which one should you choose? Investing selection is an important step, where you analyse and compare various investment instruments within an asset class to choose the ideal one. The step involves evaluating investment instruments based on their trends, historical performance, growth potential, associated costs, and taxation obligations.
  5. Monitoring and review: Once you have invested, it is important to constantly monitor and make adjustments to your investments to ensure they always align with your investment objectives. You can use various investment tools provided by your investment platform to monitor your investments and make use of different order types, such as stop loss, to mitigate losses.

Why is the investment process important

You are putting your hard-earned money into various investment instruments when there is no guarantee that you will earn only profits. Still, a comprehensive investment process can allow you to ensure your portfolio health is positive. But why is this investment process important?

Investing is important for people who want to grow their money and handle it wisely. For that, the investment process works like a blueprint. It helps you choose ideal investment instruments, build wealth, and manage the associated risks. An ideal investment process ensures effective diversification. By spreading your money across different types of investments, you can mitigate potential market losses. The process also involves utilising numerous tried and tested investment strategies for investment success. One example is how the SDP and SIP can help grow your investment steadily over time.

What is the investment decision-making process

The investment decision process aims to let investors make informed investment decisions and achieve their investment goals. It provides a structured approach and helps investors in:

  • Selecting suitable assets
  • Diversifying investment portfolios, and
  • Adjusting their strategies to meet financial goals

Furthermore, the investment decision process guides individuals in determining the allocation of their funds across various asset classes such as shares, bonds, real estate, gold, mutual funds, FD, and more. Investing in FD can help achieve both long-term and short-term goals. For example, the Bajaj Finance FD offers interest rates up to 8.85% p.a., with flexible tenures and payout options.

The 5 important investment management process steps

Investing is half the work done; managing the investments determines the success or failure of the investment. Here’s where the investment management process comes into the picture. Similar to the 5 steps of the investment process, there are 5 investment management process steps:

  1. Tracking investment goals: The first step is to constantly track your investment goals and ensure they haven’t shifted from the day you invested. No investment goal is rigid and may change based on your lifestyle and circumstances. If your goals have changed, you should ensure that you adjust your investments in a way that they can help you achieve the new investment goals.
  2. Thorough research: Investments are volatile, and interest rates, demand and supply, external news, etc, can significantly affect your investments positively or negatively. You must conduct thorough research on your investments every quarter to ensure they show positive results and are on the right track.
  3. Diversified portfolio: One of the most important steps in the investment management process is to always ensure portfolio diversification. You may have invested in various investment instruments initially, but it doesn’t mean your portfolio health will always be positive. If you feel you can remove or add a new asset class to make your portfolio more diverse, it will help you make better profits.
  4. Gain knowledge: Every investment instrument can be evaluated based on technical and fundamental analysis to the extent that it will not significantly affect your portfolio. The investment management process includes gaining knowledge of the technical and fundamental factors along with other financial literature to ensure you know the ins and outs of investing and make the right investment decisions.
  5. Seek financial assistance: Investing may seem complex, as it involves numerous investment instruments and their associated risks. However, this should not be a reason not to create an extensive investment plan. If you feel that you do not have the required knowledge to invest or manage your investments afterwards, it is always wise to seek financial assistance to ensure your investment process is successful.

Also Read: Portfolio investment


The investment decision process simply means making a wise decision about investments. However, it should consider factors such as volatility, inflation, and liquidity risks. People are now focusing more on planning for their retirement and future financial security and stability. And all this is the direct result of an ideal investment process and investment management process.

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As regards deposit taking activity of Bajaj Finance Ltd (BFL), the viewers may refer to the advertisement in the Indian Express (Mumbai Edition) and Loksatta (Pune Edition) furnished in the application form for soliciting public deposits or refer
The company is having a valid Certificate of Registration dated March 5, 1998 issued by the Reserve Bank of India under section 45 IA of the Reserve Bank of India Act, 1934. However, the RBI does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company.

For the FD calculator the actual returns may vary slightly if the Fixed Deposit tenure includes a leap year.