Tags:

You can also put to good use investments in fixed deposits by timing the maturity to the goal. When you come nearer to your goal, consider switching your equity investment into a debt-oriented fund through a systematic transfer plan (STP), in order to protect the wealth you have accumulated so far.

Long-term goals: Investing discipline is the key when it comes to meeting long-term financial goals. Some common long-term goals include buying a home or building a sizeable retirement corpus. These mostly require regular savings from the investor over a span of a decade or two.

However, to be able to create enough wealth to satisfy your goal, a slightly aggressive stance would be needed. Over the long term, the power of equities can be harnessed to the fullest. Most financial planners advise that the investor devote a chunk of his corpus towards equities.

Most investors should be comfortable handling a bit more volatility in their portfolio over such a long time period. You should not react to short-term market movements and take out your money when the markets are down. For a 20-year goal, allow the investment to work over that period, without getting worked up over the intermittent volatility, says Pai.

This doesn’t mean that you should put all your money into equity for the long term. Most experts suggest investors take roughly 70% exposure to equity, 20% to debt and the remaining 10% in gold. This may vary according to individual risk profile.

Nitin Misra | Age 38 years | Location Delhi

Advice by: Sumeet Vaid, managing director, FFreedom Financial Planners

Long-term goal: Daughter Nysa’s marriage in 2034. Wants Rs 0 lakh at today’s prices, which will be Rs40 lakh with 6% inflation.

Time available: 11 years

How to reach it: If Nitin has to do a lump-sum investment for this goal, he needs to put aside Rs3 lakh today. This surplus is currently not available.

However, Misra has a Post Office MIS worth Rs .25 lakh which is maturing shortly. The proceeds of this needs to be invested in equity and debt in 80:20 respectively.

However, this alone shall not suffice to meet the goal, so a SIP of Rs 1,100 is advised in the same ratio in equity and debt. The equity component needs to come down as the goal comes nearer.

Again, remember to shift your equity investments into safer debt instruments as you come near your goal date, or if you achieve your target early. Your PPF investments will come in handy over this period, allowing you to safely accumulate a hefty sum over 15 years to supplement the other investments.

Monitor your investments

Your job isn’t over yet. Even a carefully developed financial plan can fall by the wayside if it is not periodically readjusted. You need to be proactive in monitoring your investments, even if someone else is actually handling your money.

Make sure you are comfortable with the investment choices and that they are working for you. Experts suggest that you review your progress on a quarterly basis when your goals are for the short term, and on an annual basis if your goals are spread over a longer period.

You need to refine your plan (rebalancing) if your asset mix gets skewed over time. If for some reason, you are falling short of meeting your goals, revisit your financial budget to see if there are any areas where you can cut corners to free up additional money for savings. Monitoring your investments will ensure that your goals are in sight.

Protect your goals

While it is good to plan investments that will help you reach your financial goals, it is equally important to protect them.

You must have adequate life insurance so that your dependents can reach those goals even in case of your unfortunate demise. Taking care of your insurance requirement is a must before you begin your investing journey. The extent of cover would depend on the assets you currently own and the financial goals you wish to achieve, says Pai.

So, you must have an insurance cover equal to the gap between your future expenses and your current assets. To arrive at this figure, deduct the value of all your current assets and investments from your expenses, which could include immediate expenses such as repaying outstanding loans, future expenses such as children’s education and the daily household expenses.

Make sure to cover your bigger obligations such as a home or car loan with a term insurance cover of matching tenure. For instance, if you are paying an EMI for a home loan spread over 20 years, it would be a good idea to take a term plan for the same period to cover the loan amount.

It is also important to set aside money for dealing with contingencies. Keep enough to take care of 3-4 months’ of living expenses so that your family is not under any financial stress during an emergency.

In the end, remember that setting tangible and realistic goals, staying disciplined during your investing period, and keeping track of your progress is the key to success in achieving all of your financial goals on time.