I would need your little help with the Goal-based investments. I am doing goal-based investments and suppose I have 3 different goals - Child's education, Buying a house, and Generate Post-retirement monthly income. So, should we consider these as individual goals and allocate mutual funds to each of these separately? If yes, while allocating funds to these different goals, can we keep the same MF in two different goals? For example, can I invest in the "ICICI Prudential Bluechip Fund - Direct Plan" fund into two different goals that I have?
How much % of Equity should I plan for each term duration: Long-term (20 years), Medium-term (8-10 years), and Small-term (5 years).
Ans: When it comes to goal-based investments, it's essential to treat each goal separately to ensure clarity and focus. Each goal has its unique timeline, risk tolerance, and financial requirements.
Allocating mutual funds to each goal individually helps tailor your investments to meet the specific needs of that goal. However, you can use the same mutual fund for different goals if it aligns with the respective timelines and risk profiles.
For instance, if a mutual fund fits the risk profile and time horizon of both your child's education and post-retirement income goals, it's feasible to invest in it for both goals.
There are some advantages to consider direct funds, and the cost savings can be significant in the long run. However, there are some potential benefits to using a regular MFD:
Advantages of Investing Through a Mutual Fund Distributor (MFD):
• Personalized Advice: MFDs can be helpful for beginners or those who lack investment knowledge. They can assess your risk tolerance, financial goals, and investment horizon to recommend suitable mutual funds. This personalized guidance can be valuable, especially if you're new to investing.
• Convenience: MFDs handle all the paperwork and transactions on your behalf, saving you time and effort. They can help with account setup, SIP registrations, and managing your portfolio across different funds.
• Investor Support: MFDs can be a point of contact for any questions or concerns you may have about your investments. They can provide ongoing support and guidance throughout your investment journey.
Regarding asset allocation, the percentage of equity you should plan for each term duration depends on various factors such as your risk tolerance, time horizon, and financial goals.
For long-term goals like retirement planning or your child's education (20 years or more), a higher allocation to equity may be suitable, given the potential for higher returns over the long run.
For medium-term goals (8-10 years), a balanced approach with a mix of equity and debt investments can help manage risk while aiming for reasonable growth.
For short-term goals (5 years or less), a more conservative approach with a higher allocation to debt investments may be prudent to safeguard capital and ensure liquidity when needed.
Remember, asset allocation is a dynamic process that may require periodic review and adjustments based on changes in your financial situation and market conditions.
As a Certified Financial Planner, I encourage you to consult with a professional to develop a personalized investment plan tailored to your specific goals, risk tolerance, and financial circumstances.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
