What is Goal-Based Investing ?



We all have financial goals—for a new home, upgrading cars, a kid’s education, a trip to Hawaii, and so on—but most do not invest based on our goals. Instead, we tend to invest in schemes and stocks based on high returns, which is necessary. However, that investment may not be targeted towards a particular or many simultaneous goals. 


Moreover, even if you have multiple investments carefully done for different financial goals, they may have multiple maturity times, leading to confusion and dilemma. 


This is where goal-based investing can help. It entails maintaining multiple SIPs or Systematic Investment Plans for multiple financial goals. The benefit? Each goal is super-easy to track, and you build a well-diversified portfolio of variable assets. Continue reading to know more about how goal-based investing can make your dream come true faster and more efficiently. 


Online Fixed Deposits on Kuvera


What is Goal-Based Investing?


Goal-based investing is a renewed process of financial management that prioritises investing to attain the set goals. Parameters like current assets in your portfolio, expense method, risk portfolio, asset allocation, and the short, medium, and long-term goals are looked upon under goal-based investing.


So if you’re wondering what is goal-based investing, it is a financial strategy that paves a direction for you and your financial goals in a systematic manner so that they’re achievable systematically. Hence, goal-based investing planning is a method of investing to achieve financial goals with systematic planning. 


Benefits of Goal-Based Investing


It doesn’t matter your financial goals, which could be for you or your family. But, if you don’t invest in your goals systematically, your financial outcomes will not mature as planned. 


This is why, while choosing goal-based investing, it is critical first to identify:


  • What goal do you need to achieve?
  • The period within which you wish to achieve the set goal?
  • The amount you need to invest for the same?


Before determining all these, you also need to remember the current price of attaining the set goal and the rise in its price.


This is where the goal-based investing calculator can help with the near-precise amount you need to invest every month in fulfilling your investment goals. 


Take a look at the benefits: 


  • Financial goals enable choosing the right investment products


Once you are sanguine with the amount required to fulfil your financial goal and the period you need to gather the corpus, you can develop an investment strategy. Then, based on the investment outlook and financial goals, you can choose from the asset classes like debt, equity, gold, etc.


For instance, short-term goals like school fees, travel, etc., require money in any circumstances. Here the focus would be on gathering that money and acquiring some growth. Therefore, fixed deposits and debt funds would be suitable.


For medium-term goals, like purchasing a car or a house, a combination of equity plus debt is fair. Because you have a slightly extended outlook, you can still survive if the market falls or turns volatile. Lastly, for long-term goals, equity is the best option. It focuses on increasing money.


  • Helps in balancing our investment portfolio


When your investments are in sync with your financial goals, it helps keep your investment portfolio balanced at proper intervals, enabling you to imbibe a thorough asset allocation strategy.


  • Setting financial goals to avoid unwanted loans


If your investments are not systematically aligned with your goals, the probability of falling short of funds when you need them turns high. For instance, you may fall short of an adequate amount of money in the time of need. In such a situation, taking a loan would become a necessity. The loan will help you achieve your goal at that moment, but you will end up in a debt maze.


Therefore, choosing a goal-based investing planning approach shall always keep you away from taking a loan forcefully.


  • Fiscal control is maintained


You can still fix situations where you have goals and lack investment, but investing without having set financial goals cannot be fixed, leaving you in a state of despair. 


Moreover, staying invested in a particular fund to achieve goals shall be a continuous process, as you know that you must not stop investing to achieve goals.


Therefore, even in the case of market volatility, you would still stay firm and learn to deal with the unfavorable market fluctuations in a good way with the help of a goal-based investing platform.


Goal-Based Investment in Mutual Funds: How Practical is It?


Mutual funds are one of the best investment solutions for different requirements and risk appetites. There are many mutual funds that you can use based on your investment goals. 


Let’s glance through some generic goals with an ideal mutual fund choice to invest in to achieve the goals.


Scenario #1: Child’s higher education and marriage


Parents are more concerned about their child’s future, so they wouldn’t want to get into extreme risks with their fund planner for higher education. 


Therefore, considering this as a long-term goal, although not as long as retirement, hybrid funds, large-cap funds, index funds, gold funds, etc., are preferred options.


Scenario #2: Planning for retirement


Planning for retirement is a long-term goal. Considering this, investing in multi-cap funds, large-cap funds, mid-cap funds, etc., are preferable. However, goal-based SIP is also the best investment option in this scenario as you have the liberty of compounding while benefiting from rupee-cost averaging that is likely to give higher returns. 


Scenario #3: Money saved on property purchase, car, or a holiday


Saving on a house and car can come under short-term or long-term goals depending on your purchase period. However, planning for a holiday is a short-term goal. 


Hence, if you plan to buy a house or a car within 1-2 years, then debt funds are suitable. However, if your goal achievement span is a little longer, say 3-years, investing in dynamic bond funds, long-duration debt funds, etc., is a preferred option.


To summarise, goal-based investing planning helps you focus on systematic and planned investments aligned with your goals.




  • Why is it important to set goals while saving and investing?

Solidifying financial goals offer benefits where you can achieve financial success. This includes being focused and clear about what you need, being motivated and developing a systematic plan. Moreover, when you invest, if your goals are in check, it becomes easy to take a step forward to something new and exciting.


  • Are financial goals important for a business?

Financial goals for a business are physical investment plans that an organization can focus on, even if it is for the short term or long term. Setting these goals can benefit the business to attain broader organizational goals. In any case, for the business to sustain and flourish, goal-based investing planning is required.


  • State the four main goals of business finance?

The three main goals of business finance are: 

    • Appreciating revenue 
    • Raising profit limits
    • Retrenching during hard times, and 
    • Receiving ROI (Return on Investment) 


Interested in how we think about the markets?


Read more: Zen And The Art Of Investing

Watch/hear on YouTube:



Start investing through a platform that brings goal planning and investing to your fingertips. Visit kuvera.in to discover Direct Plans and start investing today.

#MutualFundSahiHai, #KuveraSabseSahiHai!

Leave a Comment