Best investments options for short term as well as long term goals.

There are plenty of options available for Investments in this new era. Your expected rate of return should be reasonable. You can invest in different asset classes and consider overall portfolio return as 10 to 12%. You can fix asset mix as per your age and risk profiling.

Asset allocation is a very important part of creating and balancing your investment portfolio. This term is widely used by the financial expert. It plays an important role in maximizing the portfolio’s overall return. The most famous phrase ‘Never put all your eggs in one basket’ is used to simplify the term Asset allocation.

But investing without a goal means investing randomly which may not be sustainable and can be stooped any time if any emergencies happened. Goal-based investment helps to be focused and disciplined in investing until the goal is achieved.

Goal based Investment theory :When each and every investment made by the investor is mapped with his/her life goal is called Goal based Investment theory.

Importance of Goal based Investment theory.

When you decide to do for the vacation, what is the first thing you do ? Book your tickets? Plan your itinerary ? Or pack your baggage? No. All these things will come later. First you decide your DESTINATION. The place you want to visit.

The same logic applies in Investment too. Here also you need to decide your goal for which you need to accumulate corpus. Investing without a goal means investing randomly which may not be sustainable in long run and can be stopped any time if any emergencies happened. So always set your goals first and start Goal based Investments.

You should know what are your long term goals and your short term goal.

Long term goals may include

Buying your own house

Retirement planning

Children education

Planning for kids’ marriage

Short term goals may include

foreign/domestic vacation,

buying a car,

Buying some expensive consumer durables etc.

Generally short term goals can be divided into 1/3 yrs and 3 to 5 yrs. For 1 to 3 yrs goals your asset allocation should be 100% Debt which will have



Liquid funds and overnight funds.

For goals up to 5 yrs you can add short term Debt funds.

NEVER EVER think of investing in any Equity Fund for short term goals even if you find 1 year equity return very lucrative. For goals less than 1 year stick to saving bank account or 12 months RD only.

So for 3–5 years invest in liquid funds, recurring deposits, ultra short term debt funds. You can also convert the RD maturity amount in FD .

If time horizon of your goals are more than 7 yrs you can say that it is a mid long term goal. You can add Equity component for 7 to 10 yrs goal. Ideal mixture will be 50:50 for debt and equity. If you are higher risk taker it can be 40:60. But here your equity should be in the form of Large cap and Multi cap mutual funds only. For conservative investors you can add Index fund or ETFs.

Goals which are more than 10 yrs are really the long term goals. Those goals are kids education/ marriage and retirement etc. If you are young and goals have 20/25 years please take higher equity exposure to create a long term wealth. Young investor should not be so conservatives than they fail to generate long term wealth which they need to support them life long. At this time you can take 80% exposure in equity and can add Mid and Small cap mutual funds for these long term goals.

Let’s see how can you plan your Retirement as an example:

Retirement planning: 70% Equity 30% Debt

Investor should build their Equity portfolio based on Core and satellite approach. In this pattern, 70% proportion of money is invested in Large and Multi cap fund. The large-cap can generate 10 to 12% returns for SIP investments. These funds provide stability and minimize the downside risk of the market. The remaining 30% portion is invested in good quality in Mid and Small Cap as satellite portfolio which has the potential to generate 15 to 18% returns.

So for Equity invest in

Good quality large and Multi cap fund,

One passive Index Fund and

One Mid and Small cap fund.

For Debt part you can rely on PPF and EPF options. PPF and EPF are the best debt instruments for Retirement planning. Contribute 1.5 L every year in PPF. Also use long short debt fund as one of the debt instrument. So for Debt you can invest in



Long term debt fund

Apart from this you can consider

Gold: You can consider Gold as an investment. Gold is a good hedge against inflation. You can have gold as 5 to 10% of your overall portfolio. Start buying 1 gm of gold every month. You can buy Gold ETFs or Gold bond. These are more liquid and safe than physical gold.

Real estate: You can consider Real Estate at later stage when your salary increases. Investment in commercial properties and land can be fruitful in the long run. There is regular income through rent and capital appreciation in the Commercial property market. Real estate is Income-Oriented asset as well as Growth Oriented asset class.

So this way you can plan your short term and long term investments. Above mentioned different asset classes return varies. Low or negative returns from one asset class can be averaged out from other high earning asset class.

Last thought:

Invest in proper asset class, stick to your asset allocation as per your risk profile and stay invested until your life goal is achieved.

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