Some people starts investing on the advise of a friend/relative without committing that investment to their goals. Even starting investing is a welcome note, not linking them to their life goals is worrisome.
Why Linking Investments To Goals is Important?
Do you start journey without knowing where do you want to go?Obviously-No; Likewise while starting investment, you have to be aware of the objective of the investment and why you are investing in that product.
As you select different modes for your journey- Bike for short distance, car for long distance, flight for Quick journey, investing has to be depend on the goal and the time period of the investor.
If he needs money in few months, he has to choose safer instruments which can be liquidated at any time.Example-Savings a/c, liquid funds, overnight funds etc.
If the investor needs money in few years, he can consider fixed deposits, recurring deposits and to some extent debt funds.
If the goal is far away, the investor has to choose assets which tend to appreciate in the future with a little risk. Though there is risk associated, this assets(Stock Market,Mutual Funds, Real Estate)tend to give higher returns than inflation in the long-run.
The investor has to first identify his goal and depending on the tenure to reach that goal, he should select in between low-risk(liquid funds,savings a/c),Medium Risk(debt funds)and high risk(Equities,Real Estate) asset classes.
Once the investor is clear on his goal objective, he should stick to the basic tendency of the asset class and never worried on the short-term fluctuations in the interim investing journey.He should sit tight, watch the tendency of the asset class and enjoy the fruits of the investment.This is possible only if you linked your investments to your goals and being patient in the turbulent times!