Everyone works hard to make sure that they have money to meet their needs. People make investments into various types of investment options so that they can multiply their money. An investor makes investments today in the hope that they will earn more returns in the future.
Making good savings and investment in the correct way will give you good results. Following a good strategy and guidelines on investments will help you reach your financial goals. Investors will put their hard-earned money into investment instruments.
Some investors put more of their life savings into vacation which is not a good investment. Some people buy more assets and they do not know how to use their investments in the right way. These approaches will not be a good investment path where the investment yield will not give prompt results to them.
Some investors have their portfolio with a bundle of investments that are complex and do not yield any returns on time. They have a web of investment portfolios that are difficult to interpret and investments are made without any future plans. Investors have a goal for short term returns but they will make their investments in the long term portfolios. At a later stage, they will realise that their investments did not yield any good results that they expected.
How to match investments with financial goals?
To match investment with your financial goals it is important that you follow a methodical and disciplined approach. An understanding of your investments and linking your investment returns with your goals can help you achieve success.
The time horizon is the main factor with which you can match your investment with financial goals. If you can answer questions such as time required for investment returns, why you’re investing, what are your goals and the ways to achieve them?
Once you answer these questions and have a clear understanding then it is easy to know where your money is going towards. Determine your goals and align the time horizon to achieve each goal and select your investment to realise your goal.
Divide your goals into short term and long term goals and match your investments to achieve them.
- Short term goals
- Medium term goals
- Long term goals
1. Short term goals
Short term goals can range between 6 months to 18 months. The focus should be on increasing the savings to achieve the required amount. The priority should not be on getting higher returns. When the investments are linked to your goals then the investors remain very focused on investment. They remain prepared to deal with an uncertain future so that any changes in the market conditions can be managed.
In achieving short term goals, if the investments are not linked to goals then the fund amount will be used in day to day expenses. The investor will be clueless about where the investment fund amount is going and how to use the fund amount promptly.
The amount you have to invest in achieving a short term goal is not universal; it all depends on the time frame and the income of the individual investor. The factors such as risk handling, fund management play a significant role in making the right investment decision.
2. Medium term goals
Medium term goals range anywhere from 18 months to 5 years. After achieving the short term goals medium term goals can be achieved. Medium term goals can be to save money for a period of time to achieve a goal. For instance, a medium term financial goal can be to buy a car or an electronic gadget.
An individual can make savings every month to achieve the target goal amount. After achieving the target amount the individual can use the invested money to buy a car or an electronic gadget.
If the financial goal is bigger than based upon your income you can have a longer time period up to five years to achieve your goal. From a regular job you may put your money towards achieving your target goal. You may need to sacrifice some desires to achieve your goals.
Click here How do you determine financial goals?
3. Long term goals
Long term goals are those goals which are achievable between the period of five years to 20 years. Long term goals are generally related to professional development, child higher education, home loan and others. Long term goals are time consuming and you should keep your money invested for a longer period of time to get the return on your investment.
You need planning and a good deal of time for making your money work for you. You have to keep investing into your long term goals and do not expect any short term benefits. It is a continuous process of multiplying money if you have invested in a compounding investment.
Once you have divided your goals you have to match your investments with your goals. To achieve them you should follow the steps like identifying your investments, fixing time for your investments, building an investment corpus, monitoring your investments and achieving your goals. Below is a detailed explanation of these steps.
- Identify your Investments
- Fix timeline for Investments
- Build an investment corpus
- Monitor your Investments
- Achieve your goal
1. Identify your investments
Find out your investments and the returns on your investment to achieve your short term goals. If you have already planned investments then it is best to utilise the money only for the purpose of investment. If you have multiple investments in real estate, gold, shares, fixed deposits and others.
Then based upon your need and requirement list down your investments prioritise your goal. You have already invested a lot of your money, calculated risk and made returns. Make your investments work for you in achieving your goals in life.
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2. Fix timeline for investments
Make time bound investments. Think before you invest in the lock in period investments. Investments such as mutual funds have lock in periods. If you put your money in lock in period investments and expect to achieve goals then you cannot match your investment with financial goals. Fix the right investments with the right timeline to your goals only then you can achieve goals successfully.
3. Build an investment corpus
Investment portfolio fund amount is a large amount of money that is built over a period of time. If the fund amount which is built is huge and you have a sufficient amount then you can achieve your goal. Investment corpus is built over a period of time for 10 to 15 years or 20 years. Professional development and building good will takes a period of time. Once you build a corpus fund you can utilise the amount towards realising your dreams.
4. Monitor your investments
The amounts that you have invested keep growing over a period of time. It is like planting a seed in soil and you can see the growth of the plant into a big tree. Similarly the amount you invested will grow over a period of time and keep monitoring it. If there are any unexpected changes in the market it will affect your returns. Keep a close eye on your investments and make sure to reach your corpus amount.
5. Achieve your goal
Setting a Goal and achieving it is an art and a systematic process. Whether you goal is a short term goal or long term all you need to do is effectively plan towards building corpus money to achieve your goal. Once you have corpus amount in hand do not get tempted and misuse the money. Spend your money for the goal you have set up. It has been observed that once the fund amount reaches the investors they forget their goal for which they made investment and misuse the money.
About the author
Vinay Kumar Goguru is a finance professional with more than 8 years of diverse experience as a researcher, instructor and Industry work experience with both public and private entities. Prior to MyMoneySouq, he spent 6 years in Berkadia, It's a commercial mortgage banking company. He has a "Doctoral Degree in Commerce" and two master's degrees with a specialization in Finance, one as Master of Commerce and other as Master of Business Administration. He has written several articles on personal finance, published by different International journals. He loves traveling, reading and writing is his passion. He has a dream of writing a book on his favorite finance topics.
