Investing

How to link your financial goals to investments

People make investments for various reasons including the wedding of their child, higher education of their child, career of their child, and retirement needs. An investment includes a huge amount of money so it is important to make an investment decision wisely after considering various important factors that may affect your decision.

Before making an investment, people should know about their financial goals. Their goals will help them to select the best investment options according to their requirement. The investment decision should never be made in hurry and this decision should not also be delayed. Many people keep on delaying their investment decision and they realize it when it is too late. That is why it is important that you start investing as early as possible without delaying your decision so that you can enjoy maximum benefits in the future.

All parents want to provide the best to their child at every stage of their child’s life whether they are around or not. For this purpose, they do their best no matter what. It is important to do goal-based investment so that goals can be accomplished when the right time arrives. Many people check the performance of various options or schemes available before making an investment. Sometimes, they take the decision on the basis of returns which is definitely not a right approach. The right approach is to first know about the investment goals. The value of the financial goals should be measured by considering the effect of inflation on the value in the future. The planning should be done according to the risk appetite, age, investment horizon, and financial situation.

Check out the process of 5 steps which will help you to accomplish your goals when the right time arrives:

  • Identify your financial goals and be specific about them: You should start by identifying your financial goals. The next is to prioritize your financial goals and determining how much amount you would require in the future to accomplish your goals. Your goals should be specific. It is important that you do proper planning for each investment to achieve a specific goal associated with the investment.
  • Classification of your financial goals into short term, medium term, and long term: You may have a short term goal like to buy a car, travel to a particular destination and more. The time period for short term goals ranges from a few months to two years. You may have a medium term goal like to start a venture, to get enrollment in a course and more. The time period for medium term goal ranges from three years to eight years. You may have a long term goal like to fulfill the retirement needs or requirements, to fund the wedding of the child, and more. The time period for long term goal ranges from eight years to more years.
  • Select the assets for your portfolio: This step is about identifying the assets that would be included in your portfolio. The assets should be selected after considering your risk appetite, investment horizon, and financial goals. An investor should invest in more than one asset class in order to earn good returns. You can make a selection between equity, real estate, and fixed income.
  • Make sure that you select the right investments: It is not easy to evaluate the correct risk and returns associated with any investment. Selecting the right assets in your portfolio is also not easy. If you want to invest in various asset classes then you should consider mutual funds as they are a good option. The financial goal differs from person to person. For achieving a long term goal, it is suggested that people should concentrate on the maximization of the returns. You should include equity and fixed income securities in your portfolio. Check out the various suggestions regarding a financial approach for short term goals and long term goals:
  • Long term goal- Higher education and wedding of the child: If your long term goal is related to the wedding or higher education of your child then you should prefer investing in funds related to equity through systematic investment plans. When the expenditure date is quite near, you should transfer funds through systematic transfer plans (STPs) to liquid funds.
  • Long term goal- Retirement needs: You should start as early as possible systematic investment plans in equity mutual funds. For the purpose of retirement, you should make a shift to debt funds slowly. The corpus which has been accumulated can be transferred to those mutual funds which are less risky.
  • Short term goal- Purchasing a property: You should prefer mutual funds over home loans. Start systematic investment plans in targeted mutual funds. You should invest in fixed income securities and equity.
  • Review your portfolio: You should keep reviewing your investments and goals from time to time. The mutual funds, stocks, etc in your portfolio should be reviewed yearly. There are some products that are customized to suit the specific needs. They are similar to other plans and it is not necessary that they will suit your portfolio.

Conclusion:

People make investments in order to create wealth for the future. The various reasons for which an investment can be made include the wedding of the child, higher education of the child, career of the child, and retirement needs. It is the wish of every parent to provide the best to their child at every stage of life. They do their best to fulfill all the dreams of their child no matter what. It is important that a person identifies his or her financial goals before making an investment. Many people make this mistake of giving importance to schemes and returns instead of financial goals. The first step should be to know your financial goals. It is important to be specific about your financial goals. The goals should be prioritized. The amount should be determined that would be required to accomplish the goals in the future. Whenever you are calculating the amount that you will need to fulfill your goals, you should consider the impact of inflation on your goal in the future. In short, the inflation factor should not be ignored. You must do proper planning for each investment to achieve a specific goal associated with the investment. Your financial goals will help you to select the best investment options according to your requirement.

Once you know about your financial goals, the next step is to classify your financial goals into short term goals, medium term goals, and long term goals. A short term goal can be to buy a car or to travel a particular destination. A medium term goal can be to start a venture or to get enrollment in a course. A long term goal can be to fulfill the retirement needs or to fund the wedding of the child. The time period of a short term goal ranges from a few months to two years. The time period of a medium term goal ranges from three years to eight years. The time period of a long term goal ranges from eight years to more years. After classifying various goals into short term goals, medium term goals, and long term goals, the next step is to allocate the assets in your portfolio. You should consider your risk appetite, investment horizon, and financial goals for selecting your assets. The investment should be made in more than one asset class so that good returns can be achieved. The selection can be made between equity, real estate, and fixed income.

The right investments should be selected. You cannot easily evaluate the correct risk and returns related to any investment. In short, it is not easy to select the right assets in your portfolio. If an investor wishes to invest in various asset classes then mutual funds should be considered as they are a suitable option. The goal differs from person to person. For achieving a long term goal, it is recommended that a person should concentrate on the maximization of the returns. Equity and fixed income securities should be included in the portfolio. If your long term goal is the wedding or higher education of your child then you should invest in funds related to equity through SIPs. When the expenditure date is near, you should transfer funds through STP to liquid funds. If your long term goal is to fulfill the retirement needs then you should start as early as possible systematic investment plans in equity mutual funds. You should make a shift to debt funds slowly for the retirement. The corpus which has been accumulated can be transferred to those mutual funds which do not involve a great risk. If your long term goal is to purchase a property then you should prefer mutual funds over home loans. You should start systematic investment plans in targeted mutual funds. Fixed income securities and equity should be included in your portfolio.

On daily basis, you should keep reviewing your portfolio. You should review the mutual funds, stocks, etc in your portfolio yearly. There are some products that are customized to suit the specific requirements. These products are similar to other plans and it is not necessary that they will suit your portfolio. The investment should be made wisely after considering various important details that may affect your decision. You should not make an investment decision in hurry. The decision should not also be delayed. An investment involves a huge amount so you should make an investment wisely. There are many people who do not understand the value of an investment. They keep on delaying their decision and then they realize it when it is too late. Before investing in any option or scheme you should refer to the reviews and ratings given by the people about various schemes or options. The online medium is of great help as you can easily check all the important information about various investment options. Remember that the first step is to know about your financial goals. Then calculate the amount that you will need to fulfill your goals and also prioritize your goals. The investment should be made according to your financial goals. You must start investing as early as possible so that you have a large corpus at the due date of accomplishment of your financial goals. The financial goals will help you to select the best investment options.

If you are looking for an answer to various questions including:

  1. What is a goal-based investment?
  2. What is the 5 steps process which will help you to accomplish your goals when the right time arrives?
  3. What are short term goals?
  4. What is the time period for short term goals?
  5. What are medium term goals?
  6. What is the time period for medium term goals?
  7. What are long term goals?
  8. What is the time period for long term goals?
  9. What are the factors that should be considered while including the assets in your portfolio?
  10. How to select the right investments to achieve short term goals?
  11. How to select the right investments to achieve medium term goals?
  12. What are the various suggestions regarding a financial approach for short term goals and long term goals?

Then you are at the right place; please do scroll up the page in order to get answers to all of your questions.