In the amateur’s terms, any form of goal-setting begins with recognizing various short to long-term goals. Financial goal setting can allow you to save for an expense in the short- term, medium term and in the long term. It needs to be understood that financial goal setting is individualistic. The goals could be payment for a vacation in the short term or paying credit installments in the medium term or the ultimate retirement planning; financial goals setup eases the process. The identified goals need to be well-defined by allocation of a set value with a time horizon in hand. A much needed clarity and a timeline fixation go a long way for the financial goal achievement. It is significant as an investor to understand that greed and risk aversion both can be brutal to your financial aims. As a first time investor, it is always recommended to seek guidance from a financial advisor. The prime objective of consideration should establish relevant financial information of the individual.

This exercise helps in circling in on realistic goals and values. After understanding the goals of an investor, adjustment with respect to inflation is of imminent value. A graduate course which might cost Rs.15 lakhs today may double in 10 years! Lastly, but definitely not the least, an investor has to analyse and curate a plan that might serve his goals.

With the identification of a financial goal, devising a strategic plan suitable to maximisation of financial goals is crucial. As an investor, figuring out a goal is relatively simpler than actually getting in the mud and reaching where you wish to be. It isn’t easy to save Rs. 1,00,000 per year to meet your dreams! Considering inflation, the instruments necessary to reach your goals, examining the flexibility of the financial set based on the corpus needed and time of investment, there are more variables involved than you could fathom. This is the point where investing smartly steps in. The second step is taking in view the concept of diversification. It is unwise to put all your stakes in one bag. You actually can win the game, if you end up scattering your stakes in multiple bags because it becomes difficult for the other player to guess.

Indians from the 70’s and 80’s have sworn by investing in fixed deposits and real estate. However, the times we live in investing all our money in FD and the bank collapsing later are not an ideal scenario. Your financial goals just drowned with that money you had invested. Seeking a rate of return for an investment at 10%, the suitable and viable method is risk division. Dividing the risk in the ratio 3-4-5, will mean that you could achieve your goals optimally, while ensuring fewer chances of loss. The aim should be average weighted returns, while not delving heavily into equity risk. Another relevant factor while selection of investment instruments is taxation. It is astonishing to many that the prevalence of a taxation mechanism can lead to debt mutual funds being better than fixed deposits. A fixed deposits’ interest earned is almost fully taxable as per the marginal tax rate paid.

If you deposit Rs. 100 in an FD for 5 years, with a rate of return by the bank at 8%. The interest you earn is subject to 30% tax. When you pay a tax after internet earned, the rate of return on your investment dwindles from an actual 8 to 5.6. If you had invested that amount in a debt mutual fund instead, for 5 years, the taxation rate would have been 20%. The benefit of indexation factors in the inflation. Thus, your rate of return here ends up being 7.5% which is way better than 5.6%. Thus, a well-researched view of the market is important to an investment.

While curation of a financial plan might look tricky, it’s actually sticking to it, which is the trickier task. Several investors can deviate from their plan most because of an impatient attitude towards the market. Fear of incurring less than expected returns can also add up to the mix. There are several investors who keep hopping from mutual funds to fixed deposits and end up losing money. That is where understanding the volatility of the invested product comes in. It is the duty of the financial advisor to make it imperative for the investor to know about all the precautions. The key to making your goals a living reality is discipline. While finding out the investment that perfectly fits in your hand like a glove, scrutinize, criticise and learn. Clarifying your queries will help you take the step of getting rid of investment induced fear and greed.

Good luck with your financial goals!