Goal Based Investments - Part 1

Goal Based Investments - Part 1

A common situation

Imagine: You have planned to achieve many important things in life, like Own home, Early Retirement, and Quality Education for Children. The list is long. And you are doing regularly saving, when you get bonus, whenever you meet some big cash gift, or you still get the chance. And you are hoping that increase in the savings so that you will achieve all the things as per planed.

And then, you have watching an ad of LCD TV which is your dream to buy – but promises of big discounts. Then you take withdraw some part of your investment to buy the TV, and promise with yourself to do it’s compensate invest more. You get the LCD TV that you always wanted but casual loss of your investment.

The situation looks familiar to you? LCD TV instead of a vacation, try to keep a car or a laptop, and you understand it can happen with any of us. What most of us in life now and then sell some of its investments has not bought something unplanned? Like many other things of life that is the problem with disorganized or random investment, when you does not any target (goal) then becomes very easy to digress.

Why should goal-oriented investments?

You should know that which you’re target for saving, so if you decide to sell some of your investment that goal will affect this decision would be easy to find out. You can measure your goal than your investment, so you find out how much away from your goal.

This goal-oriented investment comes in handy. This investment makes the job very easy. Is needed simply plans to invest regularly with discipline. Come on, understand it in detail.

Different stages of goal-oriented investment

A goal-oriented investment means savings for specific goals. For this, follow these steps to be (do not worry - we understand to explain in detail every step)

  • Think of the major events of your life for whom you will have great financial need, and for which you want to save.
  • Find the cost of achieving these goals today.
  • Determine the goal is how much away from today (in a year)
  • Determine the cost of obtaining these goals at that time (using an estimated rate of inflation).
  • Calculate rate of return after tax, you can find today's investment.
  • If you need to calculate the investment per month and per year for each goal be must.
  • Especially keeping in mind these goals, start investing from today.
We can understand easily with an example. Come to assume that you are 27-year-old working women, who are in the highest tax bracket.

Step 1: Goal Setting

Many economically important incidents you want to save, for this example we assume that you are the only two goals:
  1. Buying an apartment
  2. Buying a car
Number    Target
1                Buy one apartment
2                Buy a car

Step 2: Current Valuation

What is the cost of these goals today?
  • 2 bedroom apartments in the area you intend to buy, today the cost is around Rs 3 million.
  • If you are planning to buy the car, its cost today is around Rs 5,00,000.
Number    Target                              Current Value
1                Buy One Apartment          3 million
2                Buy a Car                         500,000

Step 3: Time Limits

Now decide when you want to achieve these goals.
  • If you decide that you go when you're 50 years old, live in your own houses. This means that you have 23 years to achieve this goal.
  • You want to buy the car in 4 years today. 
Number    Target                          Current Value        Years from now
1                Buy One Apartment       3 million                   23
2                Buy a Car                      500,000                   4

Check Goal Based Investments - Part 2