How to align mutual funds to your goals?

How to align mutual funds to your goals?
September 12 08:50 2017 Print This Article

Everyone in this world has some or the other dreams and goals in his/her life. But the only barrier to these goals may be the shortage of funds. It is to prevent this shortage that we need to look at mutual funds as viable financial savings options especial. Mutual funds are very helpful for everyone out there to achieve goals and cope up with the financial problems.

For all the people out there who are from different socio economic categories and age groups can now have full access to benefits of mutual funds. Most people are usually introduced to the concept of SIP (Systematic Investment Plan) to add more value to their mutual funds. It is basically for all those people who are not interested in investing a huge amount or the lump sum amount at once. This concept makes a habit of every person to save some money every month.

How much should you keep in your mutual funds to meet your goals?

SIP has made many people develop this habit of saving money every month. However, you need to be careful about withdrawals. The withdrawals may be for some specific purpose like a planned foreign trip, buying a big ticket purchase, but it should be judiciously used and not spent on spontaneous purchases. The invested money must be used only for emergencies or retirement time.

Having a good idea about best practices in SIP have helped many small investors to save their money and allocate it as per their needs, but careful consideration has to be given to ensure that in order to fund luxuries, or needs, you aren’t left with anything when you need money the most – child’s education, child’s marriage, retirement etc.

Mutual funds must be allocated as per the goals and the time horizon

Investors have created a mentality that mutual funds are a just investment in risky equity funds but it is not such. The hunger for having higher returns make people invest in equity funds rather than realizing the fact that they are never suited for short term goals. If the funds have to be withdrawn within the short period of time, like within 2 years, then it must be invested in debt funds and not equity. The goals which are specifically less than or up to 5 years must be invested preferably in debt funds.

If the goal is too short like 3 months, then for fulfilling such desired funds must be invested in ultra short term or short term funds. They are ideal for periods between 3 months to 2 years. Equity funds are suited for investment when the time period is at least 8-10 years or more. Investors should invest ideally in equity funds when they are planning funds for the retirement purpose or for new born child’s education.

Mutual funds must be aligned with respect to the goals, investors usually set. When the funds are aligned as per the time horizon, then it becomes very easy to avoid those uncertain expenses and the funds can be secured for a greater return.


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Henry Dick
Henry Dick

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