Goal-based investing is quite a new approach to wealth management that emphasizes investing with a specific objective to be attained. Goal-based investing (GBI) involves a wealth manager or investment firm’s clients measuring their progress towards pertinent life goals, those might be saving for children’s education or building a good wealth for retirement, rather than focusing on beating the market.
Goal-based investing differs from traditional investing, in that its yardstick for success is how well the investor is able to reach his or her life goals, rather than how well his or her investments perform in the market
If a client’s main goals are to save for near retirement and fund the college education of very young grandchildren, an investment strategy would be more conservative for the former near retirement goal and relatively aggressive for the latter children’s education goal.
As an example, the asset allocation for the retirement assets might be 35% equities and 65% fixed-income, while the asset allocation for the education fund maybe 60% equities and 40% fixed-income. Individual needs and goals, rather than risk tolerance, are important drive investing decisions made under the goal-based framework. This allocation % can too change based on investor profiling & lifestyle.
The advantages of goal-based investing include:
Most Indian investors do not have an organized approach to savings and investments. The majority of people do not have saving targets as the amount of money they save is contingent upon their spending habits. Investing regularly to be able to reach the respective short, medium, long term financial goals is called goal-based investing. For example, if you plan to purchase a vehicle in the next 2 to 3 years, it can be called a short-term goal. Likewise, plans for your retirement can be termed as long-term goals.
First, be sure about your various financial goals which you wish to achieve over various time periods. Then figure out the time you have in hand to reach those goals. Once you are clear about goals and the time frames, work out the present value of each of these goals. Now, apply inflation to the current cost and you have the future value of your goal.
For example – your current cost of a future goal, which is 10 years away from now, is Rs 20 Lakhs. Assuming the average annual inflation rate at 6%, the future goal value would be Rs approximately 36 Lakhs. Therefore, you need to plan investments to reach the goal of 36 Lakhs and not 20 Lakhs.
Some of the common financial goals that you may need to plan could be Retirement, Children’s education and marriage, Savings for vacation, Vehicle or Home purchase in the short to medium term, Tax Savings, and Regular cash-flows / income planning.
SOME MUTUAL FUNDS CATEGORY – that can help you to reach the goal with proper asset allocation. Wealthfundas Experts can help you plan for Best Mutual Funds Portfolios with suitable asset Allocation basis your needs. Reach out on call/WhatsApp -8860801116
Equity funds
– These funds invest usually in equity and related securities. There are different types of equity funds based on the market capitalization of firms (e.g. large-cap, large & mid-cap, mid-cap, small-cap, multi-cap, etc.) and investment strategies (e.g. value funds, sector or thematic funds, dividend yield funds, etc.). Equity Funds can be preferred investments if you have a long-term goal of 5+ years.
Debt funds
– Debt Funds invest in fixed income securities like money market instruments, Government Bonds (G-Secs), Corporate or// PSU Bonds, non-convertible debentures (NCDs), etc. There are different types of debt funds depending on maturity/duration profiles (e.g. overnight funds, liquid funds, ultra-short duration funds, low duration funds, short-duration funds, medium duration funds, long-duration funds, etc.) and credit risk profiles (e.g. Gilt funds, corporate bond funds, credit risk funds, banking, and PSU debt funds, etc.). The selection of the right category short and medium-term goals of a few months to a few years is required. U can reach out to Wealthfundas experts for the right portfolio basis your requirement.
– Hybrid funds can invest simultaneously in both, fixed income and equities. There is a number of different types of hybrid funds based on asset allocation strategies (e.g. aggressive equity oriented hybrid funds, dynamic asset allocation funds, equity savings funds, conservative debt-oriented hybrid funds, multi-asset funds, arbitrage funds, etc.). You can invest in the right hybrid funds depending upon the risk-taking appetite and goal time horizon. For example – Hybrid aggressive funds are ideal if your risk profile is moderate and aiming for a long-term goal.
Equity Linked Savings Scheme (ELSS) are great for your tax planning goals. You can claim a deduction of up to Rs 1.50 Lakhs in a year from your taxable income and save taxes under Section 80C of the Income Tax Act 1961. Versus other options available under 80C, ELSS offers the least lock-in period of 3 yrs. Based upon your financial goal, you can invest for a medium (4 to 6 years) to long (more than 6 years) term. ELSS are diversified equity funds, it serves the twin purpose of saving taxes as well as marking these tax investments with your long-term goals. Generally said Tax Savings + Wealth Creation = ELSS.
In all the above SIP & Lumpsum investment option is available. You can start investing by link- http://p.njw.bz/88819, or call/WhatsApp for any query – 8860801116
Note- Equity &mutual funds investment are subject to market risk read scheme-related offer documents carefully before investing.
