If investors do not set their financial goals before starting to invest then it will not take them to their desired outcome. Investors should make SMART financial goals that can be achieved. Goal-based investing provides a roadmap to investors and helps to follow the right path to fulfill their dreams.
An investor without any goals can be considered to be a traveller without any destination. If you travel without clarity and do not know where to go then you will be just running around. Similarly, if the investors do not set their goals then they will not be able to reach their outcome.
To achieve financial goals investors need to set SMART (Specific, Measurable, Achievable, Realistic, Time-bound) goals. You may have life goals like education for children, marriage, retirement, buying a home, planning for a foreign vacation and more. Goal-based investing will help investors to fulfill their dreams
Once you set your goals you can decide their timeliness, priority and the allocation of the savings to achieve the desired results.
Benefits
It helps you to identify and prioritise your financial goals. Setting SMART goals helps to make informed investment decisions and ensures that the investors stay right on track. Investing based on your goals helps you to decide where you want to invest.
Once the investor knows their goal and how much time it has to be achieved they can choose the right investment product that will help them to achieve their goals in the most efficient way. Depending on the time period of the goal you can choose from debt, equity and hybrid products.
You can save for unplanned expenses through an emergency fund. There will be events that may cost huge expenses. Planning for this can give you mental satisfaction and a healthy habit of spending.
By setting investment goals investors can make an informed decision based on their needs and circumstances. Investors should review their goals and rebalance their portfolios to ensure that their money is used efficiently.
If goals are not set then investors may face huge capital requirements when the goals mature. Investors can either compromise on their goals or dispose off assets to arrange for capital or take loans. If goals are clearly set then such situations can be avoided.
If the goals are set properly and you follow the strict timelines on how to achieve them with discipline then you can achieve your goals. When investments are done without setting goals there is a lack of purpose for saving and this will cause the investors to move from investing regularly.
Online apps
There are apps provided by brokers which can be used to trade online. You can easily set goals using the app and the app will help you to save more money and earn better returns. You can also invest in SIP using the app. The apps use AI-enabled algorithms and provide recommendations.
The author is a blogger and likes to blog about the various options available in the stock market. Currently, the author has discussed goals-based investing.