Why Goal-based Investing Matters?
Why Goal-based Investing Matters?
Every investment should be aimed at a particular goal that would instigate the investors to carry on it for a specific time period. Goal-based investing (known as GBI) is the systematic way of achieving all our dreams with judicial investments in multiple funds of several categories. We set up many dreams and strive to achieve those during the course of our life. This includes smaller things like a laptop or an iPhone or bigger things like an apartment, a foreign tour, or a dream car. We sometimes fail to attain our goals not because of our financial instability, but because of our failure to carry on goal-based investing.
We should think of goal-based investing (GBI) for the following reasons:
- Setting our purpose: GBI helps to set our purpose of investment. Every investment should be directed to a specific purpose, which might be small or big. For instance, suppose you are planning to buy a laptop this Diwali or you are planning for a holiday at the end of this year. You can invest in short term funds like equity funds, mutual funds, short-term recurring in banks, or through an equity PMS for attaining such small goals. You can also save in several online banks’ savings accounts that give you higher returns than the traditional public and private banks. You can invest online in so many funds for gold or real estate across the country. If you are thinking of bigger things like an apartment, a foreign tour, or a dream car, you need more systematic investment planning. It may be Systematic Investment Plans (SIP) through a reputed mutual fund. SIP from top mutual funds will give you the scope of a higher return than the traditional recurring scheme or Public Provident Funds (PPF). You may think of PPF too if you are satisfied with moderate return and risk-free investment. You may consider long term investments in the stock market or mutual funds; the latter might have a specific lock-in period.
- Reducing the risk factors: If you are interested in Unit Linked Policies of insurance companies or SIP in mutual funds, the best way is to follow diversification. Investing in a singular fund increases the risk on investment. When you are investing in so many funds according to your short term and long term goals, it helps in diversifying the risk..
- Developing the habit of investments: GBI helps an individual investor to develop the habit of investment for even a smaller cause. This helps to attain all the dreams in a systematic way. GBI makes an individual aware of the market and its risk. So, the investor can choose the right fund, whether it may be a mutual fund or a government backed schemes, at the right time.
- Securing financial independence: A gradual and systematic way of investment makes an investor financially independent in the long run. If you can judicially use the surplus amount of your earnings every month, it would make a big difference in your life. Long term investments like equity PMS and Systematic Investment Plans in mutual funds, systematic investments in saving instruments like Public Provident Fund, investments in multiple schemes in the stock market are supposed to make you financially stable after a period of time. GBI makes the habit of investment for an investor. GBI helps to fulfill your dreams and makes you financially independent.
- Creating paths for the next-generation: When you invest for the purpose of your child’s education, it not only meets your dream but the dream of your next generation too. You create the right track of goal-based investing for your successive generation that helps them to be financially independent in the long run.
- Ensuring tension free retirement: GBI helps an individual investor to attain all his goals in the way of his life. At the same time, it ensures a tension-free retirement. Goal-based investing in the retirement plans of so many insurance companies in the Indian markets brings you a lump sum amount after your retirement that helps you to live your life with dignity. A variety of retirement funds and SIP offered by insurance companies and mutual funds across the Indian market help to grow your money for a longer period of time for your utilization during retirement. In this way, GBI helps you to enjoy your dream during your career as well as offers a hassle-free retirement.
