Align Your Needs With Your Financial Goals!

By BankBazaar | May 25, 2012

Most financial advisors advise investors to secure their financial future which can be done by linking their goals with their financial investments. Doing so, they can ensure that they get funds for completing their requirements as and when they crop up without having to dependent excessively on debt. For example, if you plan to buy yourself a house, investing in preferential funds for a period of 5-10 years can help you achieve this goal without having to depend on a home loan. Similarly if the goal that you are trying to achieve is not as huge in responsibility like owning a property, but can be for other activities like going on a vacation abroad, or buying the dream ride or even to buy yourself a laptop, all this can be achieved without depending on a loan. Just by investing in good performing funds and also with the most important human emotion – patience, intact, all your goals can be achieved.

All you need to know is to find out how much is you’re potential to earn and to invest. This will lead to the structuring of your portfolio. See to that your portfolio does not consist more than 5 Mutual fund investments. Make sure that at least 40-50% of your income after tax be invested to build a robust portfolio. Choose Mutual funds that lock your funds for a long period of time and may generate appropriate returns. Evaluate your funds based on their past performance across various market cycles. The best way to invest in Mutual Funds is to invest through the Systematic Investment Plans (SIPs). Mutual Funds under the diversified, mid-cap and balanced funds are better to opt for. Remember it is not the number of funds that matter but the amount of investment you make under each fund that increases the value of your portfolio. As your income increases, make sure that your level of savings also increase. If you manage to start saving from an early age, you not only will be able to finance your requirements but also manage to accumulate a good corpus for your post retirement life.

Once the stage is set for equities to be performing, you need to look at the debt options. Investing in debt stabilizes your portfolio and enables you to strike a good balance with the market volatility. The best debt asset is the Public Provident Fund. It provides you excellent tax benefits. Exhaust the maximum limit of Rs 70000 in this account and enjoy tax free returns after about 15- 20 years.

If you have dependents, the next step is to evaluate your insurance cover requirement. It is important to keep in mind that the surrender value and the value of the policy may differ as many times the policies carry surrender charges. This difference can be for at least 5 years or even more. Therefore you need to evaluate the amount that you are paying as charges on a particular policy and depending upon the tenor you are choosing, make sure that you evaluate the performance. It is better to opt for a pure term life cover whose surrender value is 5 times more than your annual income. But it should be remembered that you do not get much benefit since it is based on the mortality charge over the course. Apart from the life insurance, you need to invest into medical cover that provides you a general health insurance alongside a critical illness cover. This provides a complete all round protection in case of any medical emergencies.

Following these basic rules, you can ensure that you can accumulate a good corpus over a period of time along with the adequate amount of protection for yourself and also for your dependents.

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