5 Tips to use Mutual Funds for your Financial Goals

5 Tips to use Mutual Funds for your Financial Goals


All of us have Financial Goals. Some may be aspirational, such as buying a new card or upgrading our home. Others may be uncompromisable – such as a child’s education, or building up a nest egg before we finally hang up our work boots. Regardless of the kind of goals at hand, they all require advance planning and structured, disciplined saving in order to reach fruition.

All of us have Financial Goals. Some may be aspirational, such as buying a new card or upgrading our home. Others may be uncompromisable – such as a child’s education, or building up a nest egg before we finally hang up our work boots. Regardless of the kind of goals at hand, they all require advance planning and structured, disciplined saving in order to reach fruition.

Till some time back, fixed income instruments such as bank deposits used to form the backbone of goal based savings for most of us. In recent times, though, there has been a steady shift towards the widespread adoption of Mutual Funds as a tool for Financial Goal achievement. The total industry assets recently crossed 19 lakh crores, up 40% from a year ago.

If you’re contemplating using Mutual Funds to plan for your future Financial Goals, here are five tips to radically improve your chances of succeeding.

How to Invest in Mutual Fund for My Long Term Goals

Begin with a Financial Plan

Instead of just making Mutual Fund investments in an ad-hoc manner, or just informally mapping your goals onto an excel sheet, start with a comprehensive Financial Plan. Doing so will lend a lot more perspective to your goal-based savings by helping you analyze your cash flows better, often eliminating or reducing unnecessary recurring expenditures and freeing up more surpluses for your goal based investments. Revising your Financial Plan annually will also keep your savings aligned to your changing life scenario always.

Inculcate discipline through SIP’s

Instead of choosing to invest money towards your goals as and when surpluses become available, inculcate discipline into your goal based savings through monthly SIP’s (Systematic Investment Plans). If you don’t put your goal based savings on auto-pilot through SIP’s, you’ll surely find it taking a backseat every month in the face of some large ‘unplanned’ expense or the other.

Make time horizon the decisive factor

Regardless of your personal risk appetite, you need to make the time remaining to your goal as the single deciding factor for fund selection. For instance, you may be a risk averse investor, but that wouldn’t justify choosing low-risk debt funds for say, a retirement goal that’s thirty years away. In this case, the cost of conservatism may run into lakhs or crores! Additionally, the long-term nature of your goal would absorb much of the risk of losing capital. Conversely, even flamboyant risk takers need to adopt a more muted stance while planning for goals that are short term in nature. Investing into equity oriented funds for a goal that’s just two or three years away, could give rise to a scenario where you’ll need to book losses while pulling capital when your goal date arrives.

Step up your savings annually

At FinEdge we encourage savers to start with whatever is comfortable – but to subsequently step up their goal based savings at regular intervals. Many Mutual Fund  SIP’s have inbuilt “step up” features which automatically step up your outlay on a periodic basis, by a pre-decided percentage. Stepping up your monthly SIP’s can make a huge difference to your long-term wealth creation, greatly improving your chances of achieving your financial goals.

Use a tracking tool

It’s an unfortunate truth that many a well-intentioned goal-based investment falls by the wayside within a few months or years of getting started. Using a professional software program to “keep score” can go a long way in keeping you aligned to your end objectives. A tracking tool that measures your goal achievement to date, distance left to your goal, and other important parameters, can contribute more to your success than you think! AS iconic statistician Karl Pearson once said: “What is measured, improves”. At FinEdge, we utilize a state of the art, real time goal tracking tool called GoalGPS to keep our clients aligned to their future objectives at all times.

To know more about which Mutual Funds fit in best with your Financial Goals, feel free to get in touch with us.

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