All You Need To Know About Goal Based Financial Planning




“Choose the harder right, rather than opting for the easier wrong.”

We all know the importance of investing. Countless times we have heard to really grow our money that we need to start investing at an early age. But does just the thought of investing make you feel nervous?

Relax you’re not alone in the league. Studies reveal, over 60% of young investors feel overwhelmed simply by looking at diversified and multiple investing options available to them.

A tyranny of choice is one of the major problems faced by young investors. With too many options available and inadequate knowledge, picking one leads to confusion. Today, the investment sector is flooded with options like equities, bonds, mutual funds, FOREX, and much more.

That’s not the end of the list. These instruments are further distinguished by different sub-segments, hence, further widening the product array. However, with an expert’s advice, you can diversify your portfolio. This can help you to minimize the risk and maximize the returns.

Well, for individual investors, who want to take the roller coaster ride without a professional help, here is good news.

Being an expert in equity isn’t really necessary to grow your wealth. I have often observed, people with an intention to get rich easily and quickly often get in trouble. Believe me, there are no shortcuts to building wealth or money multiplication.

Warren Buffet started his journey of wealth creation at the age of 11.

People often tend to overpay for the dream of getting richer in a short span. It’s thus very essential to stay away from glamour stocks. Don’t make influential investment decisions. Rather build a smart and diversified portfolio.

So, now the question is how can you invest intelligently?

Here are some basic principles to invest intelligently. These key factors will help you grow your money for the long-term

What’s your reason to start investing?


The most essential reason for putting your money in anything other than a savings account is to avoid losing your net worth to inflation. In a general savings account, your cash will still be there for next 30-40 years, assuming you don’t withdraw any of it.

Well, is inflation your only concern?

If yes, you might be fine keeping your money in interest-earning savings accounts or fixed deposits, or low-risk bonds, or insurance, or government schemes, which are specifically designed to protect your buying power.

However, keeping up with inflation is just one argument for investing money. Other important reasons for investing might encompass – buying a dream car, buying a dream house, living a respectful and confident retirement life, giving a world-class education to your child, money multiplication, etc. These goals are difficult to achieve by saving alone, you might need to incorporate assets with higher returns. Assets ensuring higher returns involve higher risk.

These riskier assets may include stock, equity funds, mutual funds, and balanced funds.

Moral of the story is – let your purpose decide the investing vehicle.

What’s essential is to diversify your investment portfolio. This lowers the risk involved on contrary increases the returns. That’s the reason why most of the investors move toward diversification of funds — particularly for retirement investments.

When should you begin investing?

There are multiple benefits to start investing early – by having age by your side you get more time for your money to grow, as well as, you get enough time for the inevitable market downturns to settle by themselves.

Most often investors skip preparing their monthly financial to-do-list, as a result of which, they might feel unmotivated to invest for their retirement or tempted to skip a month and indulge in an extravagant shopping.

Needless to mention, it pays to stay focused. Long-term investment has multiple advantages.

Now  – make an investment for the important junctions of your life or important goals of your life, nowhere means that you invest every last dime into an investment portfolio. You need to prioritize your expenses, strategically plan your investment as per your goals, analyze your financial priorities, create an emergency fund, etc.

When you begin your investment journey, it is always suggested to follow a basic order of operations. Make sure you have enough to cover three to six months of your emergency expenses in your savings account.

If you are not comfortable doing the calculations yourself, take the help of a financial advisor, he can you set your financial priorities, identify your financial goals, balance your investment and expenses etc.

How can you start investing?

There is a pool of investment instruments available, many of which come with extra privileges, like being able to grow your money tax-free. Retirement investment plans are one of those categories. Because of the tax benefits, many investors first choose to invest up to the maximum in retirement plans, which encompasses Retirement Mutual Funds, Life Insurance, PPF, are one amongst the few.

What are the best mutual funds to choose from?

Before you choose the funds, it’s very crucial to determine your financial goals, your risk appetite, the time horizon, and your expenses.

The longer your investing time horizon, the more of your money can be in riskier assets like stocks as opposed to safer ones. This can ensure higher returns with minimum risk. The simple reason being, the more years you have to meet your goal, the more likely you will be able to recover from market crunches.

When you invest for a short-term i.e. say one year, average stock returns might range from 47% to -39%, according to a data analysis from JP Morgan. But over the 20-year time horizon, returns average a less stressful range i.e. between 7% and 17%.

It is hence suggested that an investor should have 80-90% equity fund in their portfolio as they start out, and then gradually shift to safer funds as they near their time horizon.

You may think why so?

Well, the reason to change your investing vehicle mix as you age is the closer you get to retirement and actually need your money, the higher the risk of one of those scary -39% years coming along and destroying 40 or 50 years of savings.


How much should you invest in equity funds?

Invest in Equity Funds For Retirement Planning

To decide how much to have in equity versus safer funds, apply a common birthday thumb rule. Take your age and subtract it from 100. So, if you are 35-year-old, you might have 65% of your savings in equities or more, while at the age of 65 you should invest 35% of your holdings in equities.

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