Investing with Purpose: Goal-based Investing for Women

• The current cost of the goal
• The future cost after taking inflation into account
• The regular amount required to be invested based on the expected rate of return, investment time horizon, etc.
• Implementing the goal plan and regular review till the goal is achieved

Chase Goals and Not Returns

Having a goal plan in place will keep you focused on the goals rather than chasing returns. You will come across media reports highlighting the best-performing funds in the last one year. If you don't see your fund in that list, don't be disheartened. You don't need the best-performing fund as they keep changing almost every year. You need a fund whose long-term average returns are equal to or higher than your expected rate of return. As long as that happens, you will be able to achieve your financial goals.

Avoid Market Timing

With goal-based investing, as you know your end objective, you will stay put till it is achieved. During the investing journey, the market will go through various bull and bear phases. With the financial goals in place, you will not be tempted to book profits when the markets are in a bull phase. If you do that, you will miss out on future gains if the markets continue to trend higher. 

Some investors redeem out of fear when the market is going down. However, you cannot be sure of when the market will hit a bottom and bounce back. The Axis MF reported how 40% of women stay invested during market downturns compared to 31% of men. Investors who stay invested during the down turn, benefit the most when the next uptrend starts.

Some investors book profits when markets are trending higher, hoping to redeploy the money when the market corrects. Even the best of experts cannot predict the market top or bottom. Hence, you should avoid timing the market for entry and exit, as you will not get it right most of the time.

Goal-based investing keeps you focused and helps you ride the bull and bear phases till you achieve the desired goals.

Invest Through Sip Mode

When you make a goal plan, you know the amount required to be invested regularly to reach your goal. You can invest that amount through the  systematic investment plan (SIP)mode. A SIP helps you average your purchase cost over a while. You buy more mutual fund scheme units when the market is going down. When the markets start their upward journey again, the value of the units purchased during the correction will go up, thus benefitting your entire portfolio.

With step-up SIP, you can increase the monthly investment amount on an annual basis. You can increase the SIP installment by an absolute amount or a percentage of the base SIP amount. With a step-up SIP, you can reach your financial goals faster than a regular SIP.

Achieve Financial Independence with Goal-Based Investing

With a goal plan in place for every goal, you can review the progress regularly till they are achieved. It helps you become financially independent when all of your goals are achieved one by one. Thus, goal-based investing can empower women by helping them achieve their goals and attain financial freedom.