How to Plan Investments to Meet Your Financial Goals?

The problem with many people, even today, is that they are confused and unsure about investing in non-traditional instruments. This confusion leads to them eventually not opting for any form of investment, thus making their monthly salary the sole source of income. What people fail to realize here is that they might need more money to survive in the future and that they need to divert their current income towards smart financial investments if they want to potentially grow their existing savings.

Let’s take the example of Sayan Roy Ghatak, a telecommunications engineering graduate from Jharkhand. Sayan has recently started his professional career and earns Rs.30000 per month. Sayan has a bucket list prepared for the next ten years, which includes purchasing a brand new car, buying a home, and also wishes to save enough money for marriage. How can Sayan plan strategically to meet his financial objectives?

First step: identify a financial goal

If you fail to plan your investments, you are actually planning for failure. The first step involved in financial planning is having a defined financial goal. When you set a goal, you know how much amount you need and can then search for investment avenues that might help you attain your financial goal. In Sayan’s case, he has charted out his financial goals, but the amount he currently earns isn’t sufficient to meet those goals. Thus, he needs to prioritize his goals and then establish an investment strategy. A car costs anywhere between Rs. 6-10 lakhs, a house costs Rs. 50-60 lakhs approximately, whereas the current cost of hosting a marriage is at around Rs. 15 lakhs. With an annual salary of 3.6 lakhs, his financial goals are twenty times more than what he is currently earning.

In this situation, Sayan can think about a long-term investment like mutual funds through a Systematic Investment Plan (SIP) and prioritize his more important financial goal of the three, and focus on one goal at a time. As his annual income increases every year, Sayan can increase his SIP amount and diversify his investment portfolio with other investments, too, which may potentially help him tick off all his financial goals from the bucket list.

Why Mutual Funds?

The good part about mutual fund investments is that you need not be a market expert. Mutual funds can help investors reach their financial goals. What mutual funds do is that they collect money from investors and invest this pool of funds in various assets, such as the equity market, debt instruments, gold, government bonds, and similar money market instruments depending on the type of the Scheme. There are numerous mutual funds schemes available in the market catering to investors having a different risk appetite. Mutual funds are professionally handled funds. You have the liberty to stop your mutual fund investment if there is a shortage of funds and can allow the accumulated sum to grow over a period of time. Mutual funds can be an ideal tool for long term investment and wealth creation. They hold the potential to help an individual attain his/her financial goals.

Put an end to unnecessary expenditure

Refraining from unnecessary expenses has its own advantages and are an integral part of an individual’s investment planning process. When you have to sufficient money to stay invested, your investment planning is going in the correct direction. For this, investors can consider charting out a strict monthly budget. Budgeting can help you keep a close tab on your expenses. Budgeting also paves the way for savings, which eventually translate into your investments. It helps you cut down on all your unnecessary expenses and can help you lead a disciplined and organized lifestyle. Why go to a fancy restaurant when you can cook up a nice meal at home? Why spend money at multiplex theatres when you can watch the same movie at a lower price at a single screen theatre? Why book a private cab when you can cover the distance using public transport like bus, metro or local train?

Reassess your investments

If you want to increase your chances of reaching your financial goals, you can consider evaluating your investment once before making any type of investment decision. There are a variety of mutual fund schemes available in the market, so it is essential to choose a scheme that can help you build wealth over a long period of time.

Identify how much risk you can take

One of the important crucial facets of financial planning is to identify your risk appetite. Financial planning needs to have a holistic approach, and risk profiling comes to the heart of it. Without having a definite idea about how much risk an investor can bear, investing in schemes may be futile. Once an investor determines the amount of risk, he/she is willing to take with their investment, constructing a defined investment strategy can become a lot easier.

Charting out financial goals solely isn’t sufficient. Investors need to be effect with investment planning. Investors need to be action-oriented towards their goals and always strive to stay self-motivated. After all, it is your hard-earned money that you are investing in. In a nutshell, try to stay focused on your investment strategy and invest smartly. When you play by the rules, planning investment becomes a lot easier and can help you achieve your financial goals.

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.