Most investors, invest their funds into avenue which can assure them of maximum returns in a given time frame. But little do understand as to how important it is to link their financial goal made to each investment.
If your goal is to prepay your home loan in the next 6-7 years make sure you have an investment building asset which matures at the end of 5-6 years. This will enable you to not only accumulate the funds to prepay your loan but also reduces the risk of incurring any expenses due to a premature withdrawal from a fund.
If you have a SIP in a tax-planning mutual fund, it needs to complete three years of lock-in period. So, if you are starting a 1 year SIP in the fund from April, the last SIP will be in March 2012. The lock-in for the first SIP installment will end in April 2014; likewise the three-year lock-in for the last SIP will be in March, 2015. You won’t be able to withdraw all the units before April 2015. However, you will be able to redeem the units as they complete their lock-in periods, which means you can redeem the June 2011 SIP in June 2014.
Not only is this approach of linking your financial goals to your assets necessary for SIPs but also to any kind of investments that you hold. This can save your amount that you will receive devoid of any unwanted deductions and enable you to gain from the full returns that you expected.