How to Use Goal-Based Investing for smarter investments

As the saying goes, 'A goal without a plan is just a wish'-and nowhere is this more true than investing. Imagine going to a shopping mall without a list of what you need to buy, aimlessly buying things you don't need, spending too much money, and then regretting your decisions.

Investing without a goal works in the same manner. Without investing in future goals, even intelligent savings can become scattered and useless in the long run.

Traditionally, most investors have cared only to pursue maximum returns. But today's smarter, more educated investor knows that returns are insufficient; the purpose counts.

This shift has encouraged a goal-based investing approach-where each rupee saved is aligned with a specific financial aspiration.

Let's explore how goal-based investing works, why it matters, and how to build your plan step by step!

How to Invest Based on Goals - Steps to Create a Goal-Based Plan

As COO of FinEdge, Mayank Bhatnagar, aptly states, "Goal-based investing helps bridge the persistent 'returns gap' -the difference between the returns delivered by an asset class and the actual returns an investor earns. Many investors overlook the fact that 'why' you invest is often more important than 'where' you invest."

Following is a simple step-by-step guide to creating your own customized financial goals and investment roadmap:

Step 1 - Identify Goals

The first step is stating your financial objectives over various time horizons:

• Short-term goal (1–3 years) - Consider near-term needs like building an emergency fund, replacing your phone, taking a trip, or financing a small home improvement. You must invest in safe and highly liquid investments to maintain easy access.

• Medium-term goals (3–7 years) - These objectives have a little longer timeframe but still require balance. You may need to purchase a car, build a small enterprise, or just capitalize your existing business. In this case, you must invest in moderate-risk equities with a secure debt buffer.

• Long-term goals (7+ years) - These are your long-term, life-changing goals, like your child's higher education, retirement corpus formation, or buying a second property. Long-term goals enable you to weather market fluctuations and take advantage of compounding.

Pro Tip - Break down larger goals into smaller milestones and align your financial goals and investments with the character of each goal.

Step 2 – Allocate Funds

After assessing your financial objectives, you must allocate the right investment according to the goal:

• Short-term Goals – Considering the relevance of liquidity and capital protection, invest in debt mutual funds, fixed deposits, or liquid funds.

• Medium-term Goals - Try hybrid funds, conservative equity schemes, or a customized debt-equity blend according to your risk-taking capability.

• Long-term Objectives - Here, equity emerges victorious. Because of the longer time frame, investment in diversified equity mutual schemes, index funds, or blue-chip companies can leverage maximum wealth generation due to compounding and capital gain.

Pro Tip: Life changes -and so should your plan. Review your allocations at least annually or following significant events to ensure your goal-based investment strategy remains suitable for your financial situation.

Step 3 - Select Instruments

After defining goals and allocating funds, selecting the appropriate investment instruments is essential. Here are some smart investing tips according to your requirements:

• Systematic Investment Plans (SIPs) – Best for creating steady wealth through easy contributions, particularly for medium- to long-term needs.

• Equity Mutual Funds - Best for aggressive long-term needs, such as retirement or savings, to counter market fluctuations.

• Debt Funds and Fixed Deposits - These are best for near-term goals for capital security and liquidity, which are more important than high returns.

• Bonds and Balanced Funds - Best for investors expecting moderate, definite returns with lesser risk.

Pro Tip - Use the AssetPlus Goal Planning (individual investment dashboard) and Fund Finder Tool, which suggests the best possible fund categories and asset allocations, considering your risk profile, financial objectives, and time horizons.

Real-Life Applications of Goal-Based Investing

Goal-based investing is all about maximizing returns while conducting good risk management. This is how you can invest wisely for various life goals:

Child's Education

Spending on children's education is increasing at a whopping 8–10% annually. A good university degree can cost ₹50 lakh–₹1 crore 15–20 years later.

Top Investment Options:

• Equity Mutual Funds - Balanced equity schemes or child plan mutual fund schemes have tremendous growth potential over a tenure of 10–15 years.

• Child Insurance Plans (ULIPs) - Some parents opt for Unit Linked Insurance Plans (ULIPs) with a child benefit rider, keeping the target insured even in the event of an untimely death. This gives both insurance + investment.

• SIP - Investing ₹10,000 a month through a SIP in a decent diversified equity mutual fund (assuming 10-12% CAGR) can earn around ₹25–30 lakh in 15 years.
  

Retirement Planning

Retirement is not a negotiable lifetime objective. With the life expectancy now averaging 75+ years in India, you could easily live 20–30 years post-retirement without active income.

Best Investment Options:

• Equity Mutual Funds - Optimize wealth growth over a long-term time frame of 20–30 years with inflation-beating returns because of long-term compounding

• Hybrid Funds and Debt Mutual Funds - Progressively move to conservative products 5–7 years before retirement.

• Pension Plans and Retirement-Focused Insurance – Consider retirement schemes like the National Pension System (NPS) or guaranteed income policies from credible insurers.

Pro Tip - Always add 5–6% annual inflation while estimating your retirement corpus. What may cost ₹50,000 today may be over ₹2 lakh a month in thirty years!

Home Purchase

Buying a house is the first big-ticket financial milestone for most. Since this is a medium-term goal, keeping your principal intact over high returns is more important. Here are some smart investing tips:

• Debt Mutual Funds – Short-duration debt funds are risk-free compared to equities and provide regular but moderate returns while safeguarding your capital.

• Short-Term Bonds and Fixed Deposits - Best for conservative investors who require stable income.

• Target Maturity Funds or Recurring Deposits - Best for disciplined saving with a known duration. Go for RDs or FDs that offer capital protection and liquidity.

Bonus Tip - Use AssetPlus Calculators and seek professional online and offline assistance through expert MFDs, webinars, and their Q&A resource, BizGuru.

Why Use Different SIPs for Different Goals

Shrewd investors prefer opening various SIPs, each for a specific financial objective. Instead of investing all your money in a single mutual fund or SIP, dividing your SIPs goal-wise enables you to:

• Monitor separate progress towards every goal.

• Rebalance investments according to goals' proximity.

• Prevent blending high-risk desires with low-risk necessities.

This is how you can organize your SIPs appropriately:

SIP Type	Investment Type	Goal Example
Emergency SIP	Liquid Funds, Overnight Funds	Emergency Fund (6 months' expenses)
Child Education SIP	Diversified Equity Funds, Child-specific ULIPs	Fund for Child's Higher Education (10–15 years horizon)
Retirement SIP	Multi-Cap Equity Funds (early phase), Shift to Hybrid Funds (near retirement)	Secure Retirement Corpus (20–30 years horizon)
Home Purchase SIP	Short-duration Debt Funds, Target Maturity Funds	Saving for Home Down Payment (3–5 years)

How SIP Calculators Help

SIP calculators simplify the way you can comprehend how much you need to invest in each objective every month based on the following:

• Target Amount.

• Time Horizon.

• Assumed Annual Returns.
  

For instance:

• To save a ₹30 lakh corpus for your child's education in 15 years, you will need to invest approximately ₹7,000–₹8,000 per month at an assumed rate of return of 10–11%.

• To create a ₹5 lakh emergency corpus in 3 years, an even smaller SIP of approximately ₹13,000 pm in a liquid fund would be enough.

Pro Tip: With AssetPlus' Goal-Based SIP solutions and SIP calculator, you invest wisely, track easily, and win confidently.

Conclusion

Goal-based investing is about maintaining discipline, shape, and intent in long-term investment planning. An intelligent goal-based investment strategy converts an ad-hoc investment into an efficient pursuit of your objectives, which is better-timed and better-insulated even during adverse situations.

Lastly, as Mayank Bhatnagar so aptly said, "Ultimately, the key to successful goal-based investing lies in partnering with a platform that combines technology with the expertise of investment experts, who co-own your financial goals and help you navigate market ups and downs with confidence."

Turn your dreams into tangible milestones with AssetPlus and transform your life, milestone by milestone! Take control of your financial future - explore AssetPlus' goal-based SIP tools and begin your journey toward smarter, stress-free investing today!