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We have been taught from our elementary school that setting a goal is crucial to our long-term success. After all, it is impossible to go to the intended target without precisely identifying the destination. However, once you discover what is essential to you, the objectives you create for yourself will help you stay motivated to attain them.
Like many other things in life, this extends to our economics as well. Here, the notion of setting investing goals becomes important. This method of investing is often known as goal-based investment. This blog talks about what goal-based investing is and how it works.
Understanding Goal-Based Investing
We all have a long list of goals we want to fulfill in the future. This might include purchasing a house, a car, going on a trip, arranging for a quiet retirement, and so forth. As a result, it is natural to feel intimidated and concerned about whether you will attain all of your objectives.
This is when goal-based investment comes in handy. Goal-based investing involves establishing your financial objectives, creating a timeframe for each one, and making investments to achieve them on a regular basis in order to achieve them.
Planning Your Financial Goals
To begin with, you must understand your numerous financial goals that you desire to attain throughout various time periods. Then you must determine how much time you have to achieve your objectives. Once you've determined the target and time period, calculate the current cost of your objectives. Now, multiply the current cost by inflation to get the future worth of your target.
For example, suppose your present value of a future objective is Rs 10 Lakhs and it is 5 years away. Assuming a 5% yearly inflation rate, the eventual objective value would be around Rs 13 lakhs. As a result, you must plan your investments to accomplish the Rs 13 Lakhs objective rather than the Rs 10 Lakhs goal.
Retirement, children's education and marriage, vacation savings, car or home purchase in the short to midterm, tax savings, and income planning are some of the main financial objectives that you may need to prepare for.
Mutual funds are appropriate investment alternatives for a wide range of financial goals, depending on your time horizon and risk tolerance. To achieve your investing goals, you can employ many types of mutual funds with varying investing objectives.