Most of the people do not have any solid money goals in mind when they invest their money. While investing in itself is a pretty good habit, not attaching it to a goal can be wrong. It is somewhat similar to boarding a bus without really knowing the destination.
To make sure that you reach the right destination on time, you need to fix your financial objectives and then work on your investment strategy based on it. Fortunately, there are now so many different investment options in India that you can easily find something for each of your objectives.
1. Long-Term Goals
Usually, long-term goals are goals that can take at least more than 5-10 years to achieve. Retirement planning, repaying home loans, child's education or marriage, etc. are some of the most common examples of long-term goals.
As the duration is very long, these goals generally require a very disciplined investment approach. Mutual funds, especially equity funds are known for their long-term wealth creating potential. To be more disciplined, you can also consider starting SIP in mutual funds. PPF, bonds, and tax-saving FDs are some other options.
2. Medium-Term Goals
Medium-term investment goals are mostly goals that can take 2-5 years. Some popular short-term goals can be paying for higher education, purchasing a car, down payment for a home loan, and repaying loans like personal or auto loans.
For mid-term goals, your focus should be on investments that offer a combination of decent capital appreciation with the right amount of safety. Balanced mutual funds, large-cap equity funds, FDs, and gold bonds are some top options to achieve mid-term goals.
3. Short-Term Goals
These are the goals that can be achieved within 1-2 years. Clearing your credit card debt, small home improvements, purchasing furniture or appliances for the home, international holiday, and down payment for a car loan are some of the most common short-term goals.
Beating inflation is generally the most important objective of all the investments done for achieving short-term goals. Liquid mutual funds, recurring deposits, are some of the ways to invest money for short-term goals.
Selection Based on Personal Profile
Even if a particular investment option is in line with your financial objectives, it is not necessary for it to be the best option for you. Right investment selection apart from your goals, also depends on your personal investment profile.
You should take factors like your age, risk appetite, marital status, number of family members, and current financial health into consideration for making the right decision. All the different investment options also have different tax treatments. Make sure that you also check how your preferred investment option is taxed for making a smart decision.
Focus on Diversification
Avoid sticking to a particular type of investment even when it suits your money goals and personal profile. You should always focus on creating a diversified portfolio with assets from different markets like the stock market, mutual funds, bonds, bullion, insurance, etc. to build a well-balanced portfolio.
Such portfolios remain protected from volatility in case if a particular market starts underperforming.
Investing with Goal in Mind
Every individual has many goals in mind. In most cases, these goals come with a big price tag. Saving and investing strategically is the only way to achieve them on time. Match your objective and personal profile with the different types of investment goals to make it easier for you to pick the best investment option.