Article by Harish Rao
(Simple Equation)

This is how football commentators scream when a team scores a goal in a charged football match. That’s how important it is. And you will hear it often during the Football World Cup, which would start in mid-June.

As in Football, so in Life. Goals are very important. They are the very foundation of a successful Financial Plan.

Is Goal Planning meant only for the big things in life – like Marriage or Higher Education or Retirement. Yes and No. Yes, they are definitely a must for more important things in life. No, they can be adopted and adapted for even short and medium term requirements. And with amazingly successful results.

What exactly is a Short, Medium or Long Term Goal?

In my personal opinion, anything with a time horizon of less than 2 years is a Short Term Goal (STG). So taking a cruise around Singapore in the summer of 2019 is a STG. Paying School Fees every quarter would be a STG. The most important requirement while planning for STG would be Safety and Liquidity. Investments in Liquid Funds, Ultra Short Term Funds, Low Duration Funds and Short Term Income Plans fit well for STG. Even a SIP in such schemes may be a good idea. Why miss an opportunity to earn a little bit more.

Medium Term Goals (MTG) are those that stretch from 2 to 5 years. So, funding overseas education in 2022 or house renovation in 3 years are examples of MTG. In such cases, your funds have time to pick up useful returns. Investments in Corporate Bond Funds, Credit Risk Funds and a wide assortment of Hybrid Funds are highly recommended. You should consider a SIP in such funds, which may provide a very useful kitty at the time of redemption.

Long Term Goals (LTG) should ideally have really long time horizons – 10 to 25 years. Goals such as Overseas education, house construction, retirement etc. require huge corpuses at the end – anything from 50 lacs to 10 crores. Giving yourself a genuinely long term horizon, means you are making compounding work in your favour. And if your scheme of choice is Equity, then all market cycles eventually average out to provide more predictable returns. Remember in the long term volatility tends to reduce as various market factors, be it commodity prices or interest rates, tend to revert to long term mean. LTG are best met through early start SIPs, with annual top-ups of the SIP amount.

Easy to use Calculators help you fine tune time horizons, required returns and suggested asset allocation. So what are you waiting for? There is a Short, Medium and Long Term Goal out there that is crying for your attention. In the world of investments, there is only one thing that you cannot afford. Delay. So start right now. My best wishes in this journey to fulfil your goals.

Harish Rao is a Money Management Coach, Mentor and Trainer. He has over 20 years experience in the world of Mutual Funds.