Financial security provides every individual the impetus for better living. If you are financially secured, things are always on a smooth run in your life. Managing financial security effectively is the need of the hour and we should frame financial objectives and set life goals actively identifying and planning for them.
We belong to a generation where there is growing job insecurity, cascading inflation and lack of a comprehensive pension system. In this scenario, financial security acquires paramount importance in the overall scheme of things and managing it well is critical for fostering family’s investments and thereby multiply income generation. There is an impending need to actively craft and plan the family’s investments in such a manner so as to be aligned to investment objectives and personal life goals.
What is the key to financial security? Is it an asset of a secured bank balance, property and credit to refer precisely? Well these things give you financial security but maintaining this security is really a big deal. This is exactly where planning for financial security or more comprehensively financial security comes into focus.
Take an example, you inherit a large property of your grandparents. And elated as if on top of the world you start using or spending from the asset in reckless terms. What will be the consequence in course of time? Things get over without giving you an opportunity to recover. On the other hand, another gentleman begins from zero and through conscious financial planning; bit by bit he builds up an asset and may be at the end of the day this turns out to be an empire. In the words of eminent Scientist Albert Einstein, the power of compounding is the eighth wonder of the World. History has many such legend examples where the individual began from nothing and ended with everything.
What do these two examples try to portray? They actually signify the importance of financial planning and the need to set life goals. Depending on life goals, one could plan for short-term, medium term and long term investments. Benefits of linking investments with life goals via active management or planning are many and varied. Not only does it help manage our investments with a clear objective in mind, but also provides a framework to guide investment selection.
Once the tenor and timelines of goals are clear, one can choose the right mix of asset class based on risk vis a vis return. Mutual Funds offer a plethora of choices for an average investor to pick up the right asset class depending on your profile. Mutual Funds are serviced by Registrar and Transfer Agents (RTA) like CAMS for all their customer servicing needs.
Listed below are some of the choices an Investor can make depending upon his/her goal related objectives.
|Nature of Goal||Tenure||Preferable mode of investment||Benefits|
|Short to medium term||1-3 years||Fixed Income||Ensures capital protection and checks volatility|
|Medium to long term||3-10 years||Income fund||Best returns complemented with safety with little volatility|
|Balanced Mutual Fund||Capital appreciation with
|Long term||Above 10 years||Equity or hybrid funds||Negates volatility combined with better returns acting as a hedge against inflation.|
Success in financial planning and ensuring financial security depends upon identifying our life goals, setting timelines, calculate the amount of funds required for life goal fulfillment and link investments to each individual goal. Once our vision and priorities are clear, we should embark on a monthly investment plan or design a plan with disciplined investing over the year selecting the right type of funds suiting our profile. In such a focused manner, expenditure and savings management can be conducted in an admirable manner. Financial planning is no child’s play. You need to dedicate an ample amount of time to work on it and systematically schedule things to earn maximum benefits.
So, what are you waiting for ?? Isn’t the time to enlist your life goals and actively plan for them ? Start the process sooner than later to ensure your financial security.