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How does Goal Based Investing approach help you to select Mutual Fund?

How does Goal Based Investing approach help you to select Mutual Fund?
Mutualfund | May 12, 2020

Planning a investment without goal is just like planning a journey without destination .We always have a plan for all the small or big important activities and events in our life. Even in our day to day life we are knowingly or unknowingly systematically engaged in planning and acting according to plan.

Like in morning buying a milk according to the number of people and their intake of milk, cooking food according to appetite of the family and if some guest are coming then taking the estimate and ordering or cooking food for them and the precision of that planning is so well that nobody will be starving. So we all plan for all micro, small and big events in our life, similarly we should ask our self few important questions while investing.


 Is it a right amount of investment?

Am I investing according to my plan or need?

 Am I saving enough according to my need?

Am I investing in a right fund according to my need?


All these questions have only one solution that is Goal Based Investing.Let us understand the crux of Goal Based investing while correlating and identifying the solutions for following question.


What is a Goal of your investment?

How much Amount of Savings required for your goal?

Have you addressed/ covered all your risk before saving?


What is the probability of your investments helping you achieving your goal?

The entire Goal Based Investing is based on the solutions of all above questions and addressing and identifying the solutions of these questions create the path of prudent investments. The real gist of prudent investments is investing according to your specific goal and monitoring the progress of your goal. To achieve your long term financial goal it is extremely important to Set A Goal, Invest For A Goal And Monitor a Progress of your Goal.


How the Goal based Investing works for you?

Firstly you have to identify our specific goal for which you want to start investing and the time frame available to reach that goal. Once you identify the goal and its time, you have to identify the current amount required for your goal and add the inflation in current amount according to the number of years remaining for that goal to identify the future cost or the amount to achieve.

After calculating the future cost of your goal ,decide on the asset allocation according to your risk profile and calculate the exact amount of Monthly investment/ SIP or Lumpsum Investments or the combination of lumpsum and Monthly/ SIP investments you are planning to invest for your goal.

Fundvaliz helps you to plan your Child`s Educations in 4 simple steps.

Step 1.  Let`s Give it a Name -   Rahul`s Education.

Step2 . What would Education course  cost today - 6 lacs.

Step3.  How many years will your little one be ready to secure admission in this course? - 10 Years.

Step 4. Click Next .

Fundvaliz backend does the calculation and Rahul Graduation planning would look like.

Year in Graduation  - 2030

Target amount - 11.82 ( 6 lacs in year 2030 will be 11.82 with 7 % inflation).


Now it depending on your risk appetite and asset allocation in accordance to time available for achieving the goal the amount of Monthly investments or Lumpsum investments can be calculated.

Let`s take a balance approach of investment in fund allocation considering the available time of investment which is 10 years and the returns assumption of 13 % per annum.

Then the monthly investment amount required (SIP)  to achieve the goal would be around Rs. 5000 or the lumpsum amount required to achieve the goal would be around 3.5 lacs.

Every individual have different goals according to their needs. The goals are like

 Retirement , Kids Education , Marriage, Buying Home, Business Start Up Buying New Car Vacation

How Mutual Fund Help you to plan for your Goal?

Rahul Graduation  goal  is long term goal which has to be achieved in 10 years with balanced risk approach then the allocation can be done in combination of Large Cap , Mid Cap and Multi Cap funds. If there is any short term goal like buying a car in next 2 years then the asset allocation can be done in combination of short term debt fund and arbitrage fund for better tax efficiency on investments ( Arbitrage fund with 2 year investment will attract only 10% Capital Tax gains compared to short term debt fund which will be taxed for short term capital gains at applicable tax slab as per the income tax )

Pawan MeharFounder, FundValiz

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Mutual fund investments are subject to market risk. Please read the scheme information and the related documents carefully before investing. Past performance is not indicative of future returns. Please consider your specific investment requirements before choosing a fund, or designing a portfolio that suits your needs.

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