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Don’t Lose Sight

Every game is played with a plan in mind. The absence of a plan brings in the element of uncertainty, especially in times of distress or when one finds oneself with one’s back against the wall. Proper planning - clearly identifying the goals at various stages of life, monetising the need and then backing them with the right asset mix - is a step towards attaining your objective with ease. Having identified the important milestones, such as arranging for the down payment before getting a home loan, kids’ education needs or planning your retirement, the one vehicle that helps achieve all of it is mutual fund. There are equity schemes for investors who are willing to take greater risk to meet their goal, say, ten years down the line. Less volatile debt funds aim for goals of less than three years. If your goal is around five years away, balanced funds with a mix of equity and debt assets come handy. Ideally, make use of systematic investment plans (SIP) that helps keep costs lower and instills discipline in savings. Use online SIP calculator to know your returns on investments for mutual fund investment. And, be invested in the growth option of the schemes.


To buy a home is a compelling task and saving for the down payment is essential for even being eligible for a home loan. First, get an idea of the purchase price and the EMI payments you will be able to afford. Then calculate the amount of savings you need to every month. If the time horizon is less than three years, you may not take more risk as equities need a longer time-frame to perform. So, it will be better to save through debt funds. When the time horizon is close to five years, balanced funds are the best. Balanced or hybrid funds, as the name suggests, allocate assets in their portfolio to both equity and debt, with a bias towards equities. As the goal nears, start moving to debt funds. If there is a gap in funding, opt for loans against existing assets like bank fixed deposits. If you are still short of funds, liquidate investments, especially those generating lower than inflation returns and not nearing maturity.

Plan Your Retirement With Investment Plans From Franklin Templeton


When you consider taking the mutual fund route to plan for your child’s future, get a fix on your target amount and then work backwards to ascertain how much money you need to put aside every month. If your child needs the funds about 7-8 years from now, opt for equity funds. Stick to large-cap funds as they invest in well-established, top-rung companies and are, therefore, less volatile. High-risk funds, such as thematic An investor education and awareness initiative by Franklin Templeton Mutual Fund This article was part of ‘Head Start’ series which was published in Outlook Money Magazine. Mutual fund investments are subject to market risks, read all scheme related documents carefully. funds, can be considered to get the kicker in returns. The idea is to take the equity advantage and yet control the risks you take. Opt for well-performing equity schemes with established track record. A more passive way is to choose Exchange- Traded Funds (ETF) and index funds or a mix of them. Saving 5 per cent to 10 per cent through gold ETFs may see you through. Put any windfalls like bonuses, arrears into existing investments. As you near your goal, shift to debt funds to preserve the corpus accumulated. Make use of systematic withdrawal plan (SWP) to shift funds from equity to debt, regularly.


Once you start accumulating your retirement funds, you will want your money to work harder for you. So, invest in instruments where compounding takes place more frequently. Readjust your risk profile gradually to increase returns. Asset allocation will depend largely on the level of risk you are comfortable with. When you are younger with more disposable income and fewer liabilities, you are more likely to take risks. Hence, your funds portfolio should be heavy on equity funds - 80 per cent if you are the aggressive type; if you are conservative, a 60 per cent allocation to equity funds is good. In your 30s, lighten up on your equity funds holding marginally - the aggressive investor from 80 per cent to 70 per cent and the conservative from 60 per cent to 40 per cent. In the 40s, and beyond, stick to the asset mix. To provide for retirement income invest regularly in Nationals Savings Certificates. Make provision for annuities to see you through the retirement years. Capitalise on schemes like Senior Citizens Savings Scheme and SWP feature of funds to manage regular income needs. The right mix of assets goes a long way in determining how much you end up having at the end of your goal.

Next To Come: Identifying Financial Risks