Everyone has different financial goals, with varied time horizons, and there are plenty of investment products out there that aim to help you achieve your goals. Choosing the right type of investment product or fund for each goal is crucial, and there are important considerations for you to think about. In this section, learn more about how to choose the right type of fund for each of your goals.
There are many different types of mutual funds, and it is important to choose the right ones that meet your various investment objectives.
Life has many expenses and financial decisions in store for you – big and small decisions, urgent expenses and not so urgent ones.
There are different types of financial goals with varying time horizons, and various investment products, such as mutual funds, are available to help you achieve them. When setting them, it is important for each goal to be specific, achievable and measurable.
Goals-based investing is crucial if you wish to stay on track to achieve your goals. It involves having a customized plan and choosing specific products that may have the best chance of meeting each particular goal.
You can also categorize your goals in order of priority, ie on a scale from the important and urgent goals (financing a house), to not-so-urgent ones (buying a new car), to distant future goals (funding your desired retirement lifestyle).
You should first allocate funds for the important and urgent goals, and then for the others once the high priority goals are covered.
You can also choose between investing lump sum amounts or starting a systematic investment plan. Lump sum investing involves investing a single sum of money at one go. A systematic investment plan (SIP) involves contributing regular, fixed and often-small amounts into an investment product, like a mutual fund.
Let's focus on an important financial goal for everyone – buying a house and ensuring you can afford the mortgage payments comfortably.
This goal requires a steady growth of investments meeting their long-term accumulation goals. In this situation, you could consider investing in equity funds. Depending on your risk appetite, there’s a wide range of equity funds to choose from, like large, mid, small-cap as well as sector funds.
Now fast forward to your retirement. You would want regular, passive income from your investments to fund living expenses, which may come from long-term bond funds.
People are living longer. This increasing lifespan means you may also want to consider funds that have the potential to beat inflation over long periods, such as large-cap equity or balanced funds, so that your money retains its real value.
There is an endless number of scenarios and your circumstances and priorities can also change over time, as life is dynamic and ever-changing. It is important to continuously assess, monitor and track your progress towards your goals.
Mutual funds can be a one-stop simple solution for all your various investment goals. Choosing the right type of fund involves understanding a fund’s investment strategy, style, objective and risk profile, which then offers invaluable insights into the role it can play in your goals-based investing journey.
