how to make a Investment plan

For most of your life, you will be earning and spending money. Rarely, though, will your current money income exactly balance with your consumption desires. Sometimes, you may have more money than you want to spend; at other times, you may want to purchase more than you can afford. These imbalances will lead you either to borrow or to save to maximize the long-run benefits from your income.  When current income exceeds current consumption desires, people tend to save the excess.  They can do any of several things with these savings. One possibility is to put the money under a mattress or bury it in the backyard until some future time when consumption desires exceed current income. When they retrieve their savings from the mattress or backyard, they have the same amount they saved.  Another possibility is that they can give up the immediate possession of these savings for a future larger amount of money that will be available for future consumption. This trade off of present consumption for a higher level of future consumption is the reason for saving. What you do with the savings to make them increase over time is investment.1Those who give up immediate possession of savings (that is, defer consumption) expect to receive in the future a greater amount than they gave up. Conversely, those who consume more than their current income (that is, borrow) must be willing to pay back in the future more than they borrowed.  The rate of exchange between future consumption(future dollars) and current consumption(current dollars) is the pure rate of interest.  Both people’s willingness to pay this difference for borrowed funds and their desire to receive a surplus on their savings give rise to an interest rate referred to as the pure time value of money.  This interest rate is established in the capital market by a comparison of the supply of excess income available (savings) to be invested and the demand for excess consumption (borrowing) at a given time. If you can exchange $100 of certain income today for $104 of certain income one year from today, then the pure rate of exchange on a risk-free investment (that is, the time value of money) is said to be 4 percent (104/100 – 1).