Investing goals | Image Resource: m1.com
When you begin to invest, you should identify your goals. Investment should not be made to achieve higher returns as it can lead to mistakes. You can set goals like buying a home, a child’s higher education, marriage or retirement. You should invest to reach the goals you set.
There are different types of goals like Short-term, Mid-term and Long-term. Short-term goals can be like planning for a vacation and the duration of the investments is 1 - 3 years. Midterm goals are like buying a car or starting a business, and the duration of the investments is 3 - 5 years. Long-term goals are like retirement or a child’s education or a child’s marriage, and the duration of the investments is more than 5 years.
Goal-based investing can give direction to your investments. Here, you know the purpose of investment. The performance of goal-based plans is measured based on how they help you meet your personal goals. You can invest periodically through a Systematic Investment Plan (SIP) to achieve your defined goal.
With Goal-based SIP, you need not time the market, and you get benefits like compounding and wealth creation in the long term.
Setting goals
You should consider inflation when you calculate the future values of your goals. For example, if the cost of higher education is Rs. 5 lakhs and the inflation is 5% then you will need to reach an amount of Rs. 6.38 lakh considering the inflation.
You should set goals that are SMART: Specific, Measurable, Attainable, Relevant and Time-bound. For example, a SMART goal can be like ‘Rs. 25 lakhs by 2027 for my kid’s higher education’.
Online apps
Most brokers now provide online apps to trade in the stock market. The app uses advanced AI algorithms to help to achieve your financial goals. You can set up your investing goals in the app and get suggestions on where you should invest.