Explainer: What is Goal-Based Investing? Achieve Targets and Maximize Returns


Rajasthan News


Critical Steps for Investing Wisely: To accomplish significant milestones in life, you must strategize carefully and save consistently. Goal-based investing involves directing your investments towards specific objectives, ensuring that your financial efforts align with your aspirations.

Understanding Goal-Based Investing: Everyone harbors dreams of achieving something substantial in life, whether traveling to a new destination, purchasing a car, buying a home, or funding their children’s education. Some individuals even plan for a comfortable retirement. However, more than simply dreaming about these goals is required; thoughtful planning and regular saving are crucial. Additionally, investing in the right places is vital in reaching your targets. This is where goal-based saving becomes invaluable.

Your investments can span various avenues, including real estate, mutual funds, or gold. As you strategize your investment withdrawals, you must account for inflation and the time required to achieve each goal. These two factors will significantly influence how much money you need to save. Once you’ve established your goals, the next step is to calculate the funds necessary to achieve them. To do this effectively, you must understand the impact of inflation and the timeline for reaching each objective.

Focus on a goal-based investment scheme

According to Vivek Jain, the head of investments at Policybazaar, whether your aspiration is to purchase your dream home, save for your child’s education, or plan for retirement, focusing on a goal-based investment scheme is essential. For instance, if you aim to retire at 60 and set aside ₹20,000 every month for the next 25 years, assuming an average return of 12% from market-related products, you could accumulate approximately ₹3.8 crore for your retirement.

Identify Your Goals and Set Priorities

Begin by compiling a comprehensive list of all your financial goals. Once you have this list, prioritize them based on their importance and urgency. This approach will provide clarity on where to allocate your investment resources effectively.

Calculate the Amount Needed for Each Goal

Next, determine the financial requirements for each of your goals. Understanding how much money you will need is crucial to achieving them. Two key factors to consider are inflation and the time frame required to reach each target.

Make Informed Investments Based on Your Targets

Tailor your investment strategy according to the time needed to achieve each goal and the associated risk levels. Low-risk investments are ideal for short-term goals, while you can afford to take on more risk for long-term objectives.

Choose the Right Investment Strategy for Your Goals

To effectively achieve your financial objectives, it’s essential to diversify your investment methods based on each goal’s timeline. Consider low-risk investment options such as fixed deposits, short-term bonds, or liquid funds for short-term goals. Conversely, you can afford to take on a bit more risk for long-term objectives by investing in stocks, mutual funds, or exchange-traded funds (ETFs).

Regularly Review and Rebalance Your Portfolio

Periodically monitor your goals and investments to ensure they remain aligned. Rebalancing your portfolio as necessary is crucial, as it helps ensure your money is appropriately allocated by your evolving goals and risk tolerance.

Utilize Automatic Investments

Set up an automatic transfer from your salary to your investment account. This approach allows you to consistently contribute toward your goals without the hassle of manual transfers, ensuring that your savings grow steadily over time.

Maintain Discipline in Your Investment Approach

Regardless of your investment plan, it’s vital to remain disciplined. Prioritize investing as soon as you receive your salary, and resist the urge to make emotional decisions based on market fluctuations. Emotional responses can jeopardize your long-term financial goals, so stay focused and committed.

Monitor Your Investments Closely

Stay vigilant regarding your investments. Regularly assess how well your assets, allocated for various goals, are performing. If necessary, adjust your investment amounts or strategies to stay on track toward achieving your objectives.

Seek Expert Guidance When Needed

Consider consulting a financial advisor if you need more clarification about your investment choices or where to direct your funds. These professionals can assist you in crafting a personalized investment plan tailored to your specific goals and risk appetite.

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