There are several reasons that make investing an exercise which needs careful planning:

• To stay ahead of taxes and inflation: Taxes and inflation eat away a significant portion of your earnings, leaving you with negligible 'real returns' (i.e. returns post tax and inflation).
  
  Values in INR

  Annual rate of return on investment	6.00%
  Your personal tax rate (inclusive of education cess and higher education cess)	30.90%*
  Returns post tax	4.15% (8% - (30.90% x 6%)
  Assumed rate of inflation	4%
  Real returns	0.15% (4.15% - 4%)

*Assuming that you fall under the highest tax bracket of Rs. 8 lakh and above. The tax rates are aper the income tax laws for F& 2010-11.

Remember, inflation not only reduces the returns, but, also increases the future value of your financial goal.

Values in INR

How inflation pushes up the costs
	Today	10 years later	20 years later
Education	5 lakh	7.4 lakh	10.9 lakh
House	20 lakh	29.6 lakh	43.8 lakh
Car	7 lakh	10.3 lakh	15.3 lakh
Foreign Trip	2 lakh	2.9 lakh	4.3 lakh
Inflation is assumed at 4 per cent for calculation purpose.

Hence, it is necessary to invest in avenues which yield higher returns than the rate of taxation and inflation combined, so that your money can grow over time and you can create wealth.

• To meet increasing aspirations: Today, life is not as simple as was in the years gone by. Our aspirations have evolved beyond simple needs. Today, a 1 bedroom apartment, a small sized car, annual holiday in India, etc. may no longer suffice. Your dreams have increased with time. A larger house, a holiday abroad, foreign education for your children, etc. have become the norm. To meet these luxuries, you need to invest wisely.
• Longer life spans: Advancements in healthcare have meant that you will live longer than your forefathers. A longer life also means more living years post retirement. Plus, there might be increased medical expenses during your golden years. You will need a bigger corpus to live through your retirement years proudly and peacefully.
• To fulfil all financial goals: Being an earning member, you will be entrusted with many financial goals for your family. Moreover, you would also have many financial goals spread across various stages in your life - be it buying a new house or car, saving for your child's education and marriage or planning for a comfortable retirement. To achieve these goals, you need to invest money prudently so that all your financial goals are well met.

• Invest today and not tomorrow: The first step towards investment is to start early. Don't delay your decisions. A delay of a few years can cost you a lot of money. It is wise to start investing when you are young. Moreover, the earlier you invest, the more time you give your investments to grow into a bigger value, as you are able to exploit the benefit of compounding.
  
  Values in INR

  	Situation 1	Situation 2
  Age at which you commence investing	25 years	35 years
  Annual investment	12,000	24,000
  Number of years you invest	21 years	11 years
  Wealth at the age of 45 years	7.07 lakh (approx)	4.67 lakh (approx)
  Assumed rate of return per year - 8% Returns are calculated at the end of each year.

• Invest regularly: Don't wait for a sizeable sum of money to start your investments. Invest in small amounts and that too regularly. Even small amounts invested regularly can help you build a large corpus over time.
  Values in INR

  Rs.5000 invested monthly in different investment options for different periods will yield approximately
  Years / Interest Rate	10	20	30
  6%	8.1 lakh	22..67 lakh	48.7 lakh
  8%	9.0 lakh	28.4 lakh	70.42 lakh
  10%	9.9 lakh	35.9 lakh	1.03 crore

• Invest first and then spend : Rather than investing your savings from your monthly income, first allocate the sum towards investing and then spend the remaining. Save as much as you can and invest that amount. Cut down on your unnecessary expenses and let savings become your priority. Investing higher amounts regularly will take you closer to your financial goals and help you realize all your dreams early.