Good investment advisors are increasingly attempting that their investors do not make random investments in insurance or ULIPs and instead map these first with their various financial goals. Most investors do not have a structured approach to savings and goal-based investment and lack saving targets as the amount of money they save depends on their spending habits. But you need to keep in mind that no investment is likely to be meaningful unless it is directed towards a specific goal. You need to know the tax saving options in India that will help you to move towards your long term financial goals. Here are a few tips to help you understand more about goal based investing.
What is a Goal-Based Investment?
Every individual has financial goals that need to be fulfilled in the short, medium or long term period. Investing regularly in order to reach the respective financial goal is called goal-based investment. A goal-based investment strategy first creates a personalized financial goal according to the investor’s age, income, expenses, savings and risk appetite. Then, based on that personalized goal and the time period available to achieve the goal, an approximate amount is calculated while taking inflation, expenses and other investments into consideration.
- Gives Purpose to Your Investments
Goal based investing gives you a clear picture of what your financial goals are. Therefore, you know that the pleasure or satisfaction of the thing that you are investing for far outweighs the ordinary pleasures that you have sacrificed today. When you know the exact amount that is needed and it when is needed to meet your objectives allowing you to determine how much you need to invest. Goal based investing is beneficial in wealth creation to ensure you meet your financial objectives.
- Invest less, achieve more
Identifying your long-term investment options and goals will help you start early and give you enough time to build a sizable corpus by investing less. A 1 crore corpus may sound formidable at first glance but can be easily attained if you start with a goal early and invest regularly.
- Better investment management
With a goal-based investment plan, you are already aware of the investment horizon, whether it’s short, mid or long-term, therefore it’s easier to select the right fund. Once you have made your decision, you will be able to choose the right investment products. You know your exact requirements, which allows you to determine the life cover you require.
- Creates an Investment Discipline in You
With goal based investing, you don’t have to worry and feel guilty about spending your money because you are saving and investing for the long-term. Even if you have discontinued your investment plans due to impulsive spending, or a financial setback there is nothing to worry about. You do not have to feel discouraged and continue your investments again if you have a long-term investment horizon. As you match your investments with specific time-bound financial goals, you will be able to achieve financial independence. You will be assured that all your objectives will be fulfilled without any financial difficulties or stress.
- Freedom from Debt Stress
Goal based investing is an effective way to keep yourself away from debt. Irrespective of the size and purpose, debt has an element of stress to it. Having sufficient cash in your bank account to fund all your financial requirements brings peace to your mind and freedom in knowing that you don’t have to borrow to meet your financial goals. Investing in the right financial product is difficult and requires in-depth knowledge and analytical skills. If you want to build wealth, you need to opt for long term investment options.