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Goal Based Investment - Details and Benefits

November 08, 2016

With a complicated investment environment and multiplicity of financial goals, a systematic way to achieve sanity in your financial life is through a goal-oriented approach.

Goal-based investing is common in developed markets where individuals have separate investment plans catering to child's college fees, retirement and so on.

Indians need to adapt the same for a more coordinated attempt at actualizing their financial dreams of buying a house, a car, providing for child's education, marriage, annual pilgrimage among other objectives.

What is goal-based investing?

Goal-based investing is about listing the three to four key financial goals an individual would like to achieve on priority.He then devises separate investment plans for each of them. Typically, these goals could include buying a house, a car, child's education, marriage, building an emergency fund or a life insurance plan, retirement planning and so on.

Making separate investment plans helps achieve different goals more effectively. Goals have varying time frames. For instance, an investor may want to set aside money for a house, a car, child's education and his own retirement. Each goal has a time horizon of its own because it is unlikely he wants to achieve all the goals within the same time frame. For instance, he wants to buy a house five years later, a car within 3 years, save for child's medical college fees ten years later and plan for his own retirement 35 years later.

Hence this calls for preparing a financial plan dedicated for each goal with investments geared to optimize returns for the goal. Essentially this demands considerable planning and careful investment selection. For goals that are further ahead say 10 years or later, the investor can take on risk through equities. Goals with shorter time frames must have a judicious mix of equities (lower percentage) and fixed income investments (higher).

If investors are well-versed with financial planning, they can list down their key goals and make separate investment plans for each.

However, if they lack the time and necessary skills, they must consider engaging a competent and experienced financial advisor. After making detailed calculations for each goal based on your inputs he will go on to recommend investments for each goal. You can also have him review the plan at regular intervals and recommend changes if necessary.

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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