7 Important Investment Goals To Consider
Goals-based investing offers a useful way to map out concrete important investment goals, prioritize them, build a portfolio to attain them, measure progress, and make adjustments (if necessary) to stay on track. Read more about the 7 important investment goals you have can either make you financially stronger or leave you in a financial ruckus, depending on your choices.
You will nurture multiple investment goals in life, each with a unique set of challenges and requirements. It's no wonder financial experts and gurus so strongly advocate the criticality of goal-based investment planning.
Let' s begin with crucial short-term goals:
Short-Term Important Investment Goals
#1 Emergency fund
One aspect that can be undeniably associated with life is that it will get challenging, so it's crucial to be proactive and prepare in advance.
Building up an emergency fund is an investment goal that you should actively pursue, irrespective of your career stage. Your emergency fund will act as your financial blanket in terms of financial vulnerability. This might arise due to a draining medical expense, unexpected employment, or a high-cost repair.
Ideally, your emergency fund should be able to cover half a year's expenses.
Although viewed as a luxury by some, a vehicle is no doubt essential in many scenarios. But this doesn't mean you need to channel all your funds into buying a vehicle early in your career. Additional expenses come with a vehicle - fuel, insurance premiums, loan premiums, maintenance costs, etc.
Generally, buying a vehicle is not a spontaneous decision. It involves careful deliberations, test drives, price comparisons, and much more. It also requires goal-based investment planning.
Buying a home is reasonably high on priorities for many, feueled by easy EMIs and no shortage of supply. But like every significant investment in your life, you should not rush into buying a home early in your career. A cash buffer and a steady income to support the decision are crucial prerequisites. Here, investing in a home-based on needs, not wants, will help you save considerable money.
This brings us to the next important segment.
Dos for short-term goals:
- Start early. The earlier you begin, the faster you reach your short-term goal.
- Set aside a portion of your monthly income and invest it regularly. Safe assets include debt funds. Form a monthly budget and stick to it.
- A liquid mutual fund is also a go-to option for those who prefer to keep a portion of their emergency fund in cash.
Don'ts for short-term goals:
- Do not get into a debt trap. There is no fun in drowning yourself in debt if you can pay for a significant portion of the goal money without a loan.
- Refrain from involving high-risk investments in your short-term planning goals. Most of your investments should be in the short-term debt or liquid category.
- Avoid long-term investments with lock-ins, like PPF for short-term goals.
Long-Term Important Investment Goals
Despite their extended nature, long-term goals require in-depth planning and, of course, a resilient and investors' mindset to achieve. Let's check a few high impact long-term goals.
#4 Child's Education
Children require a significant amount of financial assistance before they are up on their feet and self-sustaining. It's why the decision to be a parent should depend on whether you can bear expenses far beyond milk and diapers.
Retirement can put you in a tricky spot. While quotes like 'age are just a number' are motivating, your body might not be able to keep up with your cheerful demeanor. This calls for investing for your retirement early in your career. Strongly consider initiating a few, if not a just one, SIPs. The early you start your investment journey, the higher returns you get to enjoy.
You should actively invest in different asset classes to create a substantial buffer until you retire. Asset allocation, without any second thoughts, needs your unhindered attention and time.
#6 Startup / Business
Being your boss is an empowering feeling for many. Those who take the plunge into running a business or startup need to take crucial tough decisions, many of which pertain to finances. Here, investment and planning are vital elements to start and keep your business/startup running.
If you run a startup with seed funding, start paying yourself a salary if you haven't already. If you invest your own money, first keep a significant portion of your savings aside for emergency purposes exclusively.
#7 Career break
The reasons for career breaks can range from job dissatisfaction and family commitments, to simply wanting to enjoy a sabbatical. Regardless, a career break means a cut in a steady income flow, and this should be kept in mind and planned for.
Start building other income streams where you can keep the money flowing while you take time off from your job. In the words of Warren Buffet, "If you don't find a way to make money while you sleep, you will work until you die." Passive investing is an excellent place to start.
Keep the following in mind to achieve your long-term goals safely and quickly.
Dos for long-term goals:
- Hire an expert who could guide you on managing different aspects of your goals and your personal finance. Look up taxes and regulations systems to avoid any hefty fines.
- Maintain an asset allocation strategy to optimize returns while maintaining capital protection by spreading your money over different asset classes.
- Get a life insurance policy early in your career
Don'ts for long-term goals:
- Don't forget to keep a check on your finances. You should know where the money is going, and where you can save it. Also, do not ignore the impact that inflation can have on your finances. Invest wisely.
- Don't invest disproportionally in high-risk options, such as small-cap mutual funds. You'll want to secure your income for goals like these.
- Do not deviate from your budget. There'll be little room to catch up.
Each of these goals, whether short-term or long-term, requires conscious deliberation and planning. The discipline and perseverance to see the plans through will keep your finances in check and thriving. Take this Risk Tolerance survey from Glide Invest to understand better how to reach your investment goals.