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Actively align life’s goals with the right mutual fund investment

Stay invested for financial security is a mantra that most of us need to follow and many do follow given the constant pressure of fluctuating interest rates, trailing returns, the inflation uncertainty and more. However while everyone has financial objectives and life goals, very few spend time actively identifying and planning for them.

What does 'actively plan' mean? The previous generation largely relied on a steady, solid job, a home and comfortable pension. This cannot be depended upon anymore in today’s day and age of lack of assured pension, growing job uncertainty, increasing expenses, etc. Managing the family’s investments for future stability and income generation is imperative. Thus there is a strong need to actively craft and plan the family’s investments in such a manner so as to be aligned to investment objectives and personal life goals.

Typically life goals are related to comfort, stability, financial needs at different life stages such as retirement, leisure, home, health, children’s education or marriage, etc. Life goals can vary from person to person. Depending on the type of life goals, one could plan for short-term, medium-term and long-term investments. Think of it like balancing the ledger between income and expenditure in the balance sheet. Similarly one needs to proactively plan for their life’s balance sheet.

Benefits of linking investments with life goals via active management or planning are many and varied. Not only does it help monitor and manage investments with a clear objective in mind, but it also provides a disciplined framework to guide investment selection. Decisions on the right mix of asset classes are easier to make since tenor or timelines of goals are clear and accordingly one can choose the right mix of asset class based on the risk vis a vis return. Mutual Funds can help navigate the plethora of asset classes available today. As people become increasingly aware of the relevance and outcome of their investments several fund houses are coming up with goal-based investment solutions for life goals such as children’s education, marriage, retirement etc.

Some of the life goals one can plan for could be:

  • Leisure related goals such as a holiday or a dream car purchase: Given these are relatively short to medium term goals ranging from one to three years it would make sense to invest in fixed income funds, which have minimal volatility, as capital protection is a priority .
  • Children Education or home purchase: These goals are typically medium to long term in the range of three to ten years approximately so income fund investment which typically offers better returns and capital safety with relatively less volatility would make meaningful sense. Balanced mutual funds, which include a mix of stocks and bonds, are also popular investments for medium-term goals given the equity debt nature of such funds.
  • Retirement and child’s marriage: Long terms goals are of longer tenor and investing earlier is advisable. In these cases regular investments into equity or hybrid funds give sufficient time to negate volatility and also provide better returns, especially against inflation, over the long term.
  • So after identifying the life goals and setting timelines, one needs to calculate the amount of funds required for life goal fulfilment and link investments to each individual goal. There are many guides, calculators and apps available today to help you arrive at the amount required such as the Axis Mutual Funds ‘Pehla Kadam’ App and a physical guide called Global Education Guide. It helps in understanding the education costs on-the-go and plan investments accordingly. Once the amount required for each life goal along with timelines is clear one should prepare a systematic monthly investment plan or create an appropriate investment plan with disciplined investing over the year and invest into the right set of funds. In this way, expenditure as well as savings can be better planned month on month. Thus now is surely the right time to pen down your life goals and start actively planning for them.

    Goals or targets depicted here are for illustration purpose only and they may or may not be achieved

An investor education initiative from Axis Mutual Fund

Goals shown are for illustration purpose only and there is no assurance that the goals represented may be achieved.

Statutory Details:Axis Mutual Fund has been established as a Trust under the Indian Trusts Act, 1882, sponsored by Axis Bank Ltd. (liability restricted to Rs. 1 Lakh). Trustee: Axis Mutual Fund Trustee Ltd.Investment Manager: Axis Asset Management Co. Ltd. (the AMC). Risk Factors: Axis Bank Ltd. is not liable or responsible for any loss or shortfall resulting from the operation of the scheme. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.

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