Goal Based Investment

Goal Based Investment

My goals

Life Without Goal is as good as Life Without Meaning

We all have dreams and desires but we do not plan our investments according to our goals, most people just invest in an unplanned manner. Goal based investing adds direction to an investment. A structured, well thought out process for investing, where you know the purpose behind each rupee that is being invested is known as goal based investing. It looks at your existing assets, expense patterns, risk profile, asset allocation and the various short, long and medium-term goals and creates a road map for each of these goals in a fairly predictablemanner.

It comprises of two parts - planning & investing. Goal planning notifies the amount that is required to fund the goal and the how much is needed to invest regularly or one-time to get to the desired amount. Investing that amount in the most suitable product helps to achieve the goal without any difficulty.

Challenges in Developing Financial Goals

Most of us have financial goals, but we rarely get around to identifying them. This is natural because thinking about the future isn’t something we do every day. It even demands the use of a part of the brain, the prefrontal cortex, that is used to imagine future scenarios. We often don’t invoke the prefrontal cortex to help plan long-term goals, and even when we do it is difficult to prioritize a range of goals at various time periods. We’re particularly bad at estimating how much we need to save in order to fund goals over time.

One of the most important benefits of goal-based planning is simply forcing us to think about what matters most in our lives. Do we really need that special home when we retire if it means we have to sacrifice other goals such as saving for a child’s education? And how much do we actually need today to fund all of our future goals?

Getting the best out of goal-based investing Determine and analyze your current financial situation and then set goals. This activity involves in understanding what you want to do with your money and how you want your financial future to look like. Goal based planning is set in three time frames; short-term, mid-term and long-term.

Why is Goal-based Investing So Valuable

Goal-based investing is valuable because it helps us understand why we are saving in the first place. If the purpose of the investment is to fund a home at retirement, we can imagine ourselves living in the home. The pleasure we’ll get from the sacrifices made today to live better in the future. We will be able to match the risk of our investments with the flexibility of the spending goal. Are we willing to take more risk in the hope of buying a larger house on the beach? Or are we unwilling to accept the possibility of living in a smaller house? By defining the parameters of the investment goal, we are better able to identify the right amount of risk with our investments.

How to go about it ?

In a planned and structured way one's current financial situation and future goals are evaluated and a clear plan is then drawn to help them achieve those goals in a manner that is consistent and fairly predictable.

The planning process involves determining how much money you will need to fund your goal; how much would you need to invest either monthly or one-time to achieve that goal and choosing an appropriate product that best suits the time horizon of investment, providing optimum returns and minimum risk.

Why should you go for it

Goal based investing ensures that the product selected is appropriate for investment and would help you achieve your goals. Investing in equity to fund short term goals can be fatal if the market turns unfavorable. "Knowing your goals, knowing the best suited product will deliver the best possible return and happy investing experience. Wealth creation happens over a long term period only. The secret sauce to wealth creation is Power of compounding

Short-Term Goals

Has a time frame of few months to one year.

It covers immediate goals such as buying a car or going for foreign vacation in the near future.

Medium-Term Goals

Involves a time frame from one to five years.

Mid term goals include buying a house or starting a business in 3-5 years down the line.

Long-Term Goals

Involves plans that are more than five years off.

It includes goals such as retirement or child education.

Short-Term Goals

Liquid Fund

Ultra-Short Term Fund


Income Fund

Medium-Term Goals

Focused Fund/ Index Fund

Balanced Fund

Long-Term Goals

Diversified Equity Fund/ELSS

Large/Mid/Small Cap Fund

Sectoral Fund/ Thematic Fund

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