Many of us start investing with just a general idea that we should earn as much money as possible out of our savings. This approach ends up in investors just wanting to know what is a ‘good fund’ to invest in?
The answer to this question actually depends on what your financial needs are,
how you translate those needs into financial goals and what solutions are available,
that can help enable you to fulfil those financial goals.
What is a financial goal, and how you can fine-tune your mutual fund investment to your goals?
A financial goal is having the right amount of money at around the right time to do something specific in life. Here are some examples of financial goals:
In four to six years, I want to have Rs 20 lakh for the down payment on an apartment that will cost Rs 80 lakh then.
From 2013 to 2015, I’ll need Rs 3 lakh a year to pay for my daughter’s higher education.
Sometime in the next two or three years, I would like to take my entire family on a vacation to Europe that may cost Rs 5 lakh.
Such clearly articulated goals are precise enough to lend themselves to financial planning, and for deciding on specific funds to invest in. To make the best use of your investments, break down your investment need into such precisely stated goals.
Once you have done this, you have all the inputs you need to make optimal use of the four financial solutions :
Each of these could be the right fit for many different financial goals. Here are some typical examples:
To Grow My Wealth: Your immediate needs are well taken care of and you are not saving for specific big-ticket expenses like a house. You don’t anticipate the need to encash your investments for a number of years. You appreciate that equity offers the best trade-off between risks and returns over the long term and would desire that your money earn these returns.
To Save Tax and Create Wealth: As above, you understand that the growth of the equity markets offers the best trade-off between risk and returns over the long term. You would like to earn these returns. Additionally, you would like to take advantage of tax-saving equity funds. These offer a perfect combination of equity-based returns and tax savings.
To Get an Additional Regular Income: In relation to you current income, you may have substantial accumulated assets and investments. Some situations where this typically may happen is post-retirement; or in the case of an inheritance; or gains from liquidating old real-estate holdings etc. In these cases, you need an investment solution that is designed to grow your investment while giving you a regular income for consumption.
An Alternative to My Savings Account: Savings banks accounts may have many conveniences but the returns are low. For a proportion of your savings bank holdings, you need an alternative that offers higher returns along with adequate liquidity.
The “Need based Solution Buckets” or Financial Solutions stated above are ONLY for highlighting the many advantages perceived from investments in Mutual Funds but does not in any manner, indicate or imply, either the quality of any particular Scheme or guarantee any specific performance/returns.
Investing with Goals and Solutions
Investors should clearly articulate their financial goals, spelling out amounts and time-frames with as much precision as feasible. They should identify the kind of financial solution that is suited for the
fulfilment of each financial goal.
We at SAMPARK offers four types of solutions that can help you fulfil a broad range of financial goals.
Source : value research