Goal planning with mutual funds

Less than 5 years ago, goals planning was a jargon and many in our country were unaware of what goals planning actually was. In simple words, goal planning means to understand what are your financial goals? How much you require in monetary terms for that financial goal? And how to reach there? Before thinking of how to reach there, it is important to understand how to actually define your financial goals.
 
A financial goal is a target which has a value attached to it in monetary term with time horizon. Let us take an example to understand it better. So let’s assume that you want to buy a car. Now, this can be treated as your goal. But still can’t be termed as a financial goal. It would be termed as the financial goal when we would attach questions to it such as which type of car, i.e. hatchback or sedan or SUV? What is the cost of such a car today? Have prices increased or decreased? And finally, when do you wish to buy the car?
 
So continuing with our example, you wish to buy a sedan car worth Rs. 7 lakhs, today. It has been increasing at an inflation rate of 5 per cent and you wish to buy it, say by the year 2020. Now, this can be termed as a financial goal. Also, bear in mind that financial goals must be reasonable and achievable.
 
While setting goals it is very important to segregate your financial goals between two major sections viz. needs and wants. Needs would include all those financial goals which you can never compromise with like your child’s education, your retirement, etc. On the other hand, wants would comprise of financial goals which can be deferred to any future date like buying a second car or a holiday home, going for an international trip, etc. So unless you have reasonably achieved your financial goals which are your needs, it won’t be prudent to save and invest for your financial goals which are your wants.
 
Now as you know what are your financial goals and how much funds do you require to reach that goal, let us move on to how to get there? The answer to the question is investments. Then it may be in any investment vehicle that would suit your risk profile. Mutual funds in one of the most efficient investment vehicle through which you can start saving for your desired financial goals and link those mutual funds investments to that financial goal. If your financial goal is for the near term then invest in debt mutual funds and if it is for the long-term then invest in equity mutual funds and if you are new to mutual funds and don’t want to take risks with your investments, but still wish to invest in equities then you may invest in equity-oriented hybrid mutual funds. Hybrid MFs are risky but still are less riskier than other equity mutual funds as they also invest some portion into debt which acts like a cushion, when the stock markets move downwards.