Above everything, the goal-based investment planning requires a timeframe comprehensive enough to set certain specific attainable goals while also ensuring that effective strategies have been formulated based off of the risk appetite. The following contains suggestions that may provide structure to your investment plan.
1. Setting Your Goals
Goals That Tend To Be Short-Term:
These objectives are generally set with a time frame of within a year which must be accomplished. Example: Purchasing a car or going on vacation.
Goals That Tend To Be Medium-Term:
These objectives are set with a timeframe of between one to five years which is meant to be completed. Example: Paying for a child’s education or renovating the house.
Goals That Tend To Be Long-Term:
These are the objectives that take more than 5 years to accomplish. Examples: Buying a house or preparing for retirement.
2. Setting A Target Amount
Ascertaining the number of assets needed to achieve goals while accounting for inflation is critical.
Example: If you wish to have Rs. 30 lakh available for the child’s marriage in a decade, you will need Rs. 64.8 lakh in the market at 8% rather than the 30 million set at the start.
3. Forming An Investment Strategy
Amount of Investment: Set an amount for investment and calculate the regular amount you are willing to invest towards the goal.
4. Evaluate Your Risk Tolerance
Identify what level of risk you can take before investing in a particular asset. Typically:
Investing in stocks and equity mutual funds tend to be more risky, which younger investors can afford to take.
Debt instruments like bonds and Public Provident Fund, on the other hand, tend to be safer investments suitable for older investors.
5. Investment Avenues Selection
Short Term Investments:
Within one year your targets can be achieved and these options are most feasible:
- Fixed Deposits (FD)
- Recurring Deposits (RD)
- Ultra short term Equity mutual funds
- Ultra short term debt mutual funds
Mid-Term Investments:
Within a 1-5 years time frame the following options can be considered:
- ELSS mutual funds
- Hybrid mutual funds
- Income funds
- Gold ETFs
Long-Term Investments:
If the investment horizon exceeds 5 years, some risks can be taken. Consider the following:
- Safer options such as Provident fund, public provident fund
- Risk takers such as small cap, mid cap, large cap equity mutual funds
- Direct equity
6. Contingency Fund
A lump sum amount for problematic situations should always be set so that they interfere as little as possible with your other investments after any unanticipated situation arises (for instance, a health issue or loss of money).
7. Health Care Coverage
- Term life insurance policies to provide protection to your family members financially, for situations that require investment in case of an emergency/incapacitation.
- Health Insurance in case of unexpected hospital visits.
Key Takeaways:
- Decide and strategize some trustable methods of investing in order to reach your set targets.
- Setting a target amount should correlate with how much inflation is expected.
- How much risk you are willing to take should be established before any investment options are looked at.
- In order to deal with unforeseen circumstances, having adequate savings and health insurance coverage would be beneficial.
- Using this strategy that puts investment goals at the forefront ensures oone maintains the balance between risk and reward, thereby achieving desired life goals.
