Instead of chasing the highest returns, what if we tell you that there is a new approach to financial and wealth management?
Defining movement in your investment journey is not when you reap higher returns, but when you unlock achievements, that bring you closer to your life goals.
Goal-based investing is a brand-new approach to investing. Whereas, as an investor you choose to prioritize your goals rather than instant returns. Setting a life goal and working towards achieving it is one of the most fulfilling things you can do with your investments.
Understanding Goal-based Investing
Life goals can vary from person to person. From retirement planning, and children’s education to traveling the world or buying a home.
Goal-based investors use a different yardstick to measure their progress than traditional investors whose sole focus is on maximizing returns.
The success-defining moment for a goal-based investor is how he will be able to meet a personal goal and in what time frame.
Consider an investor who has defined his goal as buying a new home, his investment strategy will be tailored towards attaining that goal. A rise in returns for a few months won’t deviate him from his long-term goal of being a homeowner. This investor needs to trust in the power of compounding so that in the long run his investments would yield him enough returns to afford a home.
Advantages of Goal-Based Investing:
1. Gives you a plan and purpose for your investment
Attaching a plan and purpose to your investment will help you define your goals in a more informed manner. List down your priorities such as how much time you want to achieve them, and how much money you want to achieve. Jotting down these parameters will help you align your investments with your goal.
Let’s assume that you want to plan for your daughter’s higher education, which is about 7 years away, and you need Rs 10 Lakhs for the same. In order to reach this goal, you need to take into account various factors including inflation in the education sector, which will increase your goal amount accordingly.
2. Financial goal helps you create the right investment portfolio
Being aware of your financial goals will help you create a perfect investment portfolio, tailored to your goals. You can create a diverse portfolio from various asset classes such as stocks, bonds, debts, equities, gold, and global indices.
Create a portfolio depending on the nature of your goals. If you have short-term goals such as traveling or paying your child’s private tuition fees, then going for debt fund fixed deposits would be preferable. Equities and debts are suitable for long-term goals such as buying a house or a car.
So choose a portfolio that suits the nature of your goal. Our AI-Backed All-Rounder helps you create a multi-asset portfolio with multiple asset classes to help you optimize your returns.
Financial Goals will minimize the risk of debts
Defining your financial goals will make sure that you have enough money to lean on during emergencies. Having a surplus corpus fund will help you avoid taking debts in case of emergencies and any unforeseen scenarios. Because taking a loan will hamper your efforts to reach your financial goals on time.
Rebalance your Portfolio on a timely basis
Timely rebalancing the portfolio, i.e allocating and relocating funds in different asset classes during volatile markets is important. When your goals are linked to your investments, it helps you take note of market trends to make timely rebalancing.
Rebalancing according to your goals helps you preserve your invested capital and optimizes returns.
How will Finscore help you become a goal-based investor?
Finscore is an online platform that helps you assess the health of your finances online with just a few clicks. Finscore helps you keep your finances in check as it allows you to reach your financial goals more effectively.
FinScore analyzes the health of your finances based on 15 parameters and gives you a score that reflects the health of your finances. It also takes your financial goals such as buying a home, car, retirement planning, and children’s education, etc into account while giving you a score.
Your Finscore will reflect on how close you are to reaching your goal and the report will also suggest to you the changes required to achieve your goals. Therefore, if you are a goal-based investor, then taking a Finscore assessment will help you align your finances with your goals.
Take the FinScore assessment now to know the health of your finances.