One of the most important factors to consider while drawing a financial plan is fixing the time period, especially if you are a beginner. The thumb rule is, the earlier you start, the greater the chance of achieving your financial goals.
Everyone has some goals and responsibility in life, some want to buy a new car and some are planning to retire rich so that they can enjoy their post-retirement life. We all have many dreams, but are we really investing that much time and money on building the corpus to achieve these goals. It is time tested that if one starts investing early, the percentage of building the corpus for one’s desired future financial goals is higher as compared to those who start very late in their life.
Investing according to financial goals.
Identify and priorities goals:
The first step in goal based investing is identifying and prioritising goals by segregating them into needs and wants – needs are essentials and hence get precedence over wants, which are desires and aspirations. Once decided, align your needs/wants to the time horizon.
As a young investor one should know the holding duration of any MF categories (for e.g., liquid funds, debt funds, equity funds, hybrid funds, etc.) while investing their money in mutual funds against any financial goal.
Explore the systematic method of investing in mutual funds
Investors can also benefit from the systematic plans offered by the mutual funds. For instance, a systematic-investment plan (SIP) is used for wealth accumulation. A systematic-transfer plan (STP) helps in transferring wealth from one asset to another, in safeguarding the portfolio against volatility, and in adapting to the changing risk appetite with age and increase in responsibilities. Lastly, a systematic-withdrawal plan (SWP) is useful in deriving a regular income from the created wealth created.
Power of Compounding
Young investors have an advantage in investing since the longer you stay in the market, the less risky your investment becomes and the more corpus you can generate over a period of time. This happens because of the compounding effect and the rupee cost averaging benefit you get over a long term.
Once you are done with prioritizing your financial goals of life, quantify them, that how much amount you may need to achieve those goals and based on that choose mutual fund schemes. So give wings to your dreams and start investing in something each month to achieve your goals without any burden of heavy debt on your shoulder.