I come across many people who wish to invest in Mutual funds in lump sum amounts or through the SIP route. So, I ask them, what is their goal or purpose for these investments? But most of them have no clue about it and want to invest as they have some excess money with them.

Definitely, it is much better than not investing at all. But I believe your investments should also be backed by certain purposes. If it is not a goal-based investment, it is going to be withdrawn at the slightest change in the environment.

You may need some funds for petty reasons or the market may decline a few notches, this investment will be the first to be axed. But if there is a goal associated with it like child education, Retirement plan, or for that matter proposed closure of costly liability, then you will think twice before exiting this investment. So, a well-designed and goal-based investment is a must!!

You need to be S.M.A.R.T Investor:

S: Specific / Strategic: Your investment should be for some purpose and goal as discussed above. It should define the purpose, which helps in achieving that short-term or long-term goal. The same should not be withdrawn until the goal is achieved.

M: Measurable: It should be quantifiable. You should know the approximate amount and month in which; you will receive the total returns along with the principal amount. For example in the case of SIP, You should know the expected rate of return (based on available data ) and the amount to be invested per month to reach that desired amount.

A: Achievable: It should be practical and not something beyond average returns by that class of asset. Here you should know, your ability to invest a portion of your income and raise the bar from year to year.

R: Reviewable: There should be exit routes, in case of severe changes in the particular assets. It should have liquidity and be able to convert into cash or other profitable assets if warranted.

T: Time-Bound: You should be aware of the milestones of your life. Like, as your proposed retirement year, Child reaching an important level in education, etc.

Hence, you need a professional to help; to create a path for your economic lifecycle, and be with you all along the journey.

~ Your Friend in Personal Finance,
Bhooshan Rege
Visit my website: www.polywealth.in
Email me: regebs@gmail.com
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