Hi Friends, Financial planning leads to goal setting, which means setting short-term, mid-term, and long-term goals. It is an important step toward becoming financially secure.
If you aren’t working toward financial goal, you’re likely to spend more than you should, and likely to create a higher financial risk for yourself.
Goals-based planning in investments, refers to the process of prioritising your financial objectives and determining the best way to fund them.
It broadens your focus to include all parts of your financial life, giving a structure to your anticipated expenses, at a given time in your life, and creating a corpus to meet these expenses.
Every person leads a different life with different needs, and hence every person’s financial goals are different. You could do your financial planning and create a goal based investment approach yourself or with your financial advisor.
Let us see what are Financial Goals & how mutual fund investments can help you achieve your financial goals, with a few examples:
1) A 23 year old, starting his 1st job, planning to pay-off his education loan. This translates to a short-term financial goal of having say Rs. 5 Lakhs in 2 years
2) A 28 year old, wishes to buy a home, and needs to plan for paying a down payment – a mid term goal of having a corpus of say Rs. 25 Lakhs in 5 years
3) A 35 year old, plans to create retirement corpus, so that can get a monthly annuity of Rs. 1 Lakh after 20 years, has a long term goal.
Different people will have different financial goals ranging from higher education, kid’s education, wedding expenses, buying a house, starting a business, Leisure travel, or creating a retirement corpus. Whatever be the goal, one needs to determine the amount of money required, time horizon available, and the amount of investible surplus available to invest.
With careful planning you could build Mutual Fund portfolios that would help you meet your financial goals. Of-course a lot is dependent on your risk appetite, tax profile and personal preference when building the portfolio.
Equity funds, Index funds and Hybrid funds with capital appreciation ability can help meet long term goals. Even Debt funds with higher returns such as corporate debt funds, can provide interest rates better than fixed deposits, in the mid to long term.
And arbitrage funds, money market funds, ultra short term funds can provide easy way to beat inflation while meeting your short term goals.
The earlier you set your financial goals, the higher runway you have to achieve them. Certain goals that can be set early in life should be to Get rid of debt, Build an emergency fund, plan for a down-payment for your home, and start investing for retirement as early as possible.
We discussed why you need to have financial goals and how creating a goal based mutual fund portfolio plan can help achieve these goals. It is equally important for investors to understand, that an investment plan on paper or spreadsheet is useless unless you start executing it. The earlier you start investing, irrespective of the amount, the higher is your chance of succeeding in the achievement of your financial goals.
We hope you have learnt something new today, as it is our constant endeavour to educate and make an ‘investor’ a ‘sound investor’! Happy Investing! 00m:32s
Investors should consult their financial advisers if in doubt about whether the product is suitable for them.
This publication is pursuant to Investor Awareness Initiative by Motilal Oswal Mutual Fund. This shall not be construed as offer to invest in any financial product or Scheme. The objective of this publication is restricted to informational purposes only. All investors have to go through a one-time KYC (Know Your Customer) process. For further details on KYC, Change of address, phone number, bank details etc. list of SEBI registered Mutual Funds and redressal of complaints including details about SEBI SCORES portal, visit link https://www.motilaloswalmf.com//New_Page/KYC-and-Redressal-of-Complaints/9. Investors should invest only with SEBI registered Mutual Funds details of which can be verified on the SEBI website under “SEBI Intermediaries/ Market Infrastructure Institutions. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully”.
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