How to plan for your financial goals using mutual funds

How to plan for your financial goals using mutual funds

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Financial planning helps ensure that your lifestyle and civic needs are met with ease. With the appropriatestrategy, not only can you lead a comfortable lifestyle but also achieve your financial goals, such asbuying a house/car, child’s education, smooth retirement, etc, with ease.

A proper financial plan balances savings with investment. While savings are generated with years of hard work, choosing the right investment options helps you growthis hard-earned money.

Mutual funds are types of investment tools that help create wealth over the long term. Here’s how you can plan for your financial goals with the help of mutual funds:

  1. Through Systematic Investment Plan (SIP)

Popularly known as SIP, a Systematic Investment Planis a method of investing in mutualfundschemes. An SIP allows you to invest a fixed sum at pre-determined intervals for a specified period. Over time, SIPs help investors tide over volatilityas you can get more units when the markets are down and vice versa.

To invest via SIP, you need to choose the desired fund and submit an SIP form. Fill in detailssuch as the SIP amount, frequency of investment,the duration of the SIP, and the mutual fund scheme of your choiceon the form.Submit the SIPform with a National Automated Clearing House (NACH) mandate to the Asset Management Company (AMC) to initiate the process.

  1. Through Asset Allocation Funds/Life Funds

Investing usually depends on your current age, risk tolerance, and financial condition. When you are young, you can afford market risks due to fewer financial responsibilities. However, your risk tolerance decreases as your financial dependants increase over time. So it is essential to rebalance your financial portfolio with asset allocation funds accordingly.

Asset allocation funds reduce risk exposure in volatile periods and move your money to stable investment options. Moreover, you can primarily invest in equity when youngerand benefit from the peaks and troughs of the markets, and then shift to low-risk assets like bonds, deposits, etc., as you grow older to secure your future.

  1. Have goal-based funds

As an investor, your financial goals vary based on your life stage. For instance, once you have achild, funding his/her education would becomea priority for you. To accumulate funds until the time arrives, you can invest in goal-oriented mutual funds that allow you to build a corpus for specific financial needs.

There are many mutual fund aggregator portals and distributors that allow you to make goal-based investments. With such investment options, you can invest either monthly or annually to achieve your financial goals.

Before you invest in mutual funds, consider the tips mentioned below:

  • Identify your financial goals and understand how much is required to meet those goals
  • Calculate your liquidity and risk appetite before choosing a mutual fund
  • Invest regularly to build financial discipline as well as to turn your dreams into reality
  • Know your risk appetite and invest accordingly
  • Choose a low-risk, liquid fund as an emergency corpus
  • Take help of a financial expert

To sum up, varioustypes of investmentscan be made through different mutual fund schemes to match your dynamic financial needs. Whether you have long-term or short-term goals, choosing the right mutual fundwill help you secure your future. Happy investing!

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