Goal-Based Investment Through Mutual Funds

Just like we, as individuals, are different and have different goals, there are various mutual funds out there to match our goals and investment objectives.You could be someone who is in their early 30s and would like to send your child abroad for higher education in the next 15 years. You could be someone who wants to travel the world after retiring or settle in a quiet hamlet away from the city.You might have an exhaustive list of goals- things to do and buy -from a new car to a second home.Whether your goals are long, medium or short term, whether you are an aggressive or a conservative investor, whether you want to invest in a lump sum amount or a SIP (Systematic Investment Plan) mutual funds are the way to go.

The first step is identifying the goal for which you wish to invest and the time you have to reach it. Once done, find the cost of the goal today. Add a reasonable amount of inflation to that, which will tell you the value of the target in the year you wish to accomplish that.Decide the type of mutual fund with an established and trusted Asset Management Company (AMC), work backwards and calculate the amount you have to invest via SIP or lump sum or a combination of both to reach the goal.

Retirement : Equity diversified mutual funds or sector funds could be the way to go.: Child’s education or marriage Balanced, index or gold funds could be your best bet. Saving for an international holiday, buying a car or saving for a home renovation: Short to medium term debt funds is your solution.

• One should ensure that there is sufficient diversification or spread of investments across the chosen mutual fund schemes. Be careful to not put too many or too fewer funds in one particular asset class.
• Make sure your AMC’s fund manager reduces your exposure to volatile assets and increases your exposure to more stable options as you grow older.
• Do a cost-benefit analysis to understand whether the fund management fee you pay to the Asset Management Company (AMC) is reasonable and in line with average market rates.
• Equities have the potential to deliver inflation-adjusted returns among all asset classes. Investing in equity mutual funds aids you in gaining inflation-indexed returns.
• ELSS investment helps you to save taxes. You can have tax benefits under the Income Tax Act 80C.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.