Goal Based Investment

Our goals can only be reached through a vehicle called Plan, in which we must fervently believe, and upon which we must vigorously act. There is no other route to success.” —Pablo Picasso

If you are investing without a goal in mind, then you are not saving enough for your future needs. Having a goal-based investment plan is both very important as well as useful.

What is a goal?

A lot of us think that dreaming about a house or a car is a goal. But the actual goal is where your name few things very clear in mind.

  • What is my goal? – give a name to your goal
  • When do I want to achieve this? – decide a time horizon
  • How much money do I need to achieve this goal?-Decide the monetary value of your goal

Once you have the above 3 things in your clear conscious, you are all set to take the next steps.

Mistakes to avoid while doing goal-based investment:

Not having target amount in mind: All of us want to more and more returns, but having a target amount in mind will help you to make decisions like how much do you need to invest, till when to hold and when to sell your investment. It will act as a balance between savings and expense.

Not considering inflation: The prominent reason we save and invest is to beat inflation so we can still buy the same things and live the same lifestyle even after 10 years. Always consider inflation while deciding your target amount. Calculate the future value of your goals. There are lots of calculators available in the market which can help you to do so.

Not saving enough: The most common mistake done at the time of doing goal-based investment is we overestimate our savings. Once you have determined the future value of your goal or inflation-adjusted value now it’s time to do a backward calculation and figure out how much money has to be invested regularly.

Steps to follow for a goal based investment.

Step 1 – Asses your financial situation

Whether you are looking to action a specific need or simply want the peace of mind that your finances are in good shape the financial health check will do the job. The free financial health check service is a review with one of our highly trained Wealth Coaches, over the phone or face to face.


Step 2 – Decide Goal

  • Decide the priority of the goals
  • Determine how much can you save and how much saving is needed for your goal
  • Start investment
  • Review and rebalance your past investments
  • Once you follow the above steps to decide your goal and defined how much amount you will need for it and in how many years.

Step 3– Decide the priority of the goals: There are few things we have to focus on while prioritizing.

It can be done based on time left for the goal. Like 6 months, 1 year, 10 years

Another way can be based on criticality- This means how important the goal is, can you compromise on the monetary terms etc.

For example – Goal like kids education can neither be postponed nor be compromised in terms of money requirement. So this goal should have higher priority. Whereas going for a world tour can be delayed by a few months and there is a possibility to compromise in budget requirements too, so this can be a nonfatal priority.

Based on the criticality and time left for the goal, the portions of savings should be allocated to it accordingly.

Step 4: Determine how much can you save and how much saving is needed for your goal

It’s always advisable to save at least 25% of your total monthly income; this can be dependent on your goals too. Another factor which you have to look at is your debit or credit card outstanding.

While designing a savings and investment plan, focus primarily on your debts and design a plan to clear them too. Debts take away a big portion of our savings in terms of interest. Understand and use your credit cards wisely.

Step 5: Start investment:

This is another very critical step which will need a lot of attention and precision. Always take professional help if you don’t understand financial products. Choosing a right product is very important.

  • Choose a product which suits your risk profile.
  • Don’t overestimate returns from any product especially if you are investing in equity related instrument.
  • Always diversify your investments, keep your portfolio a mixture of debt and equity products
  • Always keep some portion aside for emergencies too so any contingency won’t disturb your investment.
  • Design an effective tax plan too.

Step 6: Review and rebalance your past investments:

Once you start investing always keep a track of your investment and add or remove investment only if it is very important, don’t freak out if the short term fluctuation is not favoring your investment. Stay invested in the longer term.

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