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Go Back to Main Page Achieving Financial Goals

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Getting To Your Goals

You have been a consistent investor over a long period of time with a long-term focus on your life goals, it’s time to ensure that the landing is safe too. Taking the right decisions as your goals approach is extremely important. Unlike in the accumulation phase, where taking risk through equity-related assets was inevitable, with about three years from the goal, we suggest you shift to debt assets. The idea is to derisk your accumulated corpus and shield it from any further volatility. Your investment portfolio for each goal would typically have company shares, equity mutual funds and fixed income paper, among others. The derisking, however, has to be for specific goals and in a systematic manner.

How To Achieve Financial Goals


Even before you start the derisking process, consider your daily expenses and other commitments. Your further investments should, ideally, stop at least five years before you hit the goal. It would be wrong to keep the systematic investment plans (SIP) in equity mutual fund schemes targeted for your children’s needs if the goal is less than five years away. Why? Because equities need time to perform. Hence, if you need funds for children after 18 years, run SIPs in equity mutual funds for 15 years and in debt mutual funds for three years before you reach your goal. Calculate your returns on investment by using online SIP calculator.


Moving funds out of equity mutual fund schemes is best met through systematic transfer plans (STP) into a debt mutual fund scheme preferably of the same fund house. Using STPs you can shift funds from equities into debt funds on a regular basis, thus creating a corpus with minimal exposure to volatility. Hence, this gives a staggered approach to the shifting process. Divide the fund balance into 36 instalments and create STPs for slow and steady transitions. For example, for a balance of `10 lakh in equity mutual fund portfolio earmarked for your children’s needs, approximately `27,000 gets transferred each month into debt or liquid funds.


The same goes with your investment in company shares. Initially, book profits on those which are well above your purchase price. Exit from the small- or mid-cap stocks before selling off the large-caps based on your goals. Divert proceeds towards debt funds or bank deposits. Keep the Public Provident Fund account in your children’s name on and fund it regularly. Don’t withdraw or take a loan against it unless you are short on funds. Children could fund it once they start earning.


Unlike in the accumulation phase, where you would have used equities to save for your retirement needs, the role of equities diminishes after retirement. To make sure that your savings are intact move out of volatile equities to less volatile debt. Derisk your higher risk investments gradually by moving them to lower risk options such as debt funds, balanced funds and even monthly income plans of mutual funds. At the same time, investment in equities should, anyhow be there even after you retire. The amount you will need to move will depend on not just your risk orientation, but also whether you plan on a second career after you retire. If you go in for a second career and have a fixed income, you may risk a higher equity exposure than would be considered prudent for your age. If, however, you intend to live off your investments, debt should be the major ingredient in your portfolio.


Setting goals is one thing, but reaching there is a whole other ball game. To see each of your long-desired goals take shape, that too, comfortably and without having to stretch your existing budget or using those funds earmarked for other goals or resorting to any leverage, securing the head start advantage is of utmost importance.