We all have some future money requirements and that is why we save and invest to meet these future requirements. Goal based Investment Planning strike the right balance in investing and fulfilling the desired goal at the required time.
Goal based investment Planning not only let’s you understand the duration of your investment but it also helps you to achieve your life goals in a comfortable manner.
Goals can be short term or long term in nature.
Short Term Goals: For example if you wish to purchase your car in one or two year or plan to have foreign holiday as soon as possible say in 7 months or so.
Long Term Goals: Long term goals can be your retirement, child education, purchasing a house or leaving a legacy. The goals can vary as per the individual requirements.
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Is there any benefit of Goal Based Investment Planning
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How does Goal Based Investment Planning Works
Mr Sharma needs to go to Delhi/any other place, but he is not aware of the exact location.
What do you think about this situation?
Will he reach his destination?
Or will he reach the nearby destination?
Or he has to divert his path to some other place.
Investing without a road map or goal based investment plan is just like stating a journey like Mr Sharma.
Let’s understand with one more examples:
Mr Sharma wanted to save for his retirement. As he was not aware that how much money/corpus he will require in his retirement years to have a comfortable retirement.
He started investing a comfortable amount in an insurance policy and some amount in PPF and in Mutual fund SIP too.
He was able to make a good corpus from his invested money but in later stage he had to invest major chunk of this investment for his son’s higher education.
Little amount left for his own consumption in retirement years.
If he would have known it earlier, he could have changed the money allocation or probably invested more money.
I as a Financial Planner have seen many instances where investors invest much less than their paying capacity or their need.
They blindly invest their money to less lucrative avenues thinking it to be the best.
Life could have been more beautiful if he would have taken help of a Financial Planner.
Would have not thought in plain figure term and paid attention to compound interest instead of money figures of a investment product.
What Goal Based Investment Planning does for you?
- Identify Long Term & Short Term Life Goals: Goal based Investment Planning helps identifying your long and short term life goals such as purchase of car, Retirement, child education, wedding, purchase of house or other life goal important to you.
You will come to know that for how long you can invest your money.
- Clearly Specify your needs and wants: Goal based Investment Planning helps you to clearly differentiate between needs and wants.
It gives first priority to very vital life goals.
- Tells you want you can’t achieve with the specified investment amount.
- It clearly indicates the probability of meeting goals with the current amount of investment.
This is one very important single aspect which helps you to know and understand in time to take appropriate action.
You can either take action in time or be mentally prepared for the shortfall rather than an accident.
- Goal based Investment Planning also tell you ways like step on SIP or making investment whenever you receive any cash flow from some sources such as bonus.
- Instead of investing randomly, goal based planning gives a perspective to investor and aims to track investments based on long term goals. If investors have clear short or long term goals, they can have better asset allocation depending on their time horizon and risk profile.
- How can you use mutual funds to meet Your life goals:
- Once you have ascertained your life goals, Goal based investment Planning will calculate the amount required (inflation adjusted) in future and it will also calculate the SIP amount for you.
- Goal based Investment Planning will let you invest your bulk amount along with SIP with full calculation.
- Based on the SIP amount and duration to fulfill your need, different mutual fund can be assigned for your investment.
Random investing may or may not do same for you. It is always better to go with full planning rather than going half way.
Conclusion:
Goal based Investment Planning helps you to know and understand your financial life goals. Gives you complete calculation for your life goals and tells you various ways to achieve your target figure.
Therefore it is always prudent to have a Financial Plan or at least Goal based Investment Planning so that you can reach the destination with full conviction rather than feel like a lost investor, who is investing but does not know where would he reach.
