Short term goals are goals whose tenors are between 1- 3 years. With increased greed and haste, most investors assume that investing in high risk assets will help them accumulate the finances required in order to achieve that goal. But, in reality it does not work that way.
Assets like Mutual Funds and various other money market instruments require your time and patience to give you robust returns. Investing in them for short period of time will give you minimized benefits and maybe even negative returns. Debts like car loan, personal loan etc may be your last resort if you do not consider the prudent way of investing. The main reason one opts the savings and investment route is to secure their future without getting into the hassles of credit. In such situations, giving heed to simple minor points can help you a great deal!
For short term goals, it is best for you to invest in debt funds, hybrid funds and dynamic products since such funds allocate a certain proportion of your funds into debt and equity enabling your fund value to grow and also provides protection to your fund, to an extent, from market shocks. A combination of long term debt products that do not exceed more than 3 years can also be considered. Investing in them with the help of Monthly Investment Plans can be considered.
The best way by which you can increase the returns on your corpus is by saving at least 40-50% of your income after considering tax deductions and expenses. By this way you are making way for a higher corpus value at the end of 15 years. If your goal is to build a house in the next 3 years, try to opt for investing in FMPs since they carry tax efficiency compared to Fixed Deposits etc. If you still are short of funds, opt for a Loan against Property. Leasing a property that has a loan on it, gives you tax benefits. Make sure you get all the details about the same, so that you can reconsider your decision for opting for a debt or might consider waiting for a little longer till you manage to accumulate the required funds.
Many times, when we discuss about budgeting, it basically involves allotting certain amount of funds for completing one’s financial requirements. But many a times we forget to keep aside a certain amount as a contingency. This, in fact, is very important. Once you invest your funds in certain assets, to liquidize them may involve a lot of paper work, which means time consumption. Also, exiting from such assets before their tenor may carry penalties and fines, thereby reducing the overall value of the fund even more. Therefore it is very important that you set aside certain amount of funds as liquid cash in your Savings account so that those funds can come in handy as and when required.
If you have dependents, taking a life insurance cover is advised. Going in for a Unit linked Life insurance is not really beneficial. The main reason being, a part of your premium is invested in the market. Most insurance policies promise guaranteed returns, wherein you as a customer will be benefitted from the market booms. But not many realize what lies in otherwise. In case of a market crash, the value of your insurance is bound to reduce. This does not give you the ample protection that is required. Always opt for a pure term as this is best for you and for your dependents. Also, considering a health insurance along with a critical illness cover is advised even though your employer may be providing you.