Goal Based Investments
We are sure that everyone is going to agree with us when we say that Pakistani market goes through its fair share of ups and down within a fiscal year. These ups and downs test investors resolve to stay in the market.
Of course, the investors decision to continue investing depends on whether the market is on the rise or a decline. It also depends on what their financial goals really are.
Goal Based Investments
Goal based investments is a wealth management approach which places emphasis on specific objectives. Some examples of life goals include saving money for children’s higher education and retirement planning.
The biggest advantage of goal-based investments is that it gives investors perspective and helps them stay on track even in times when the market is volatile.
Unlike other investors, goal-based investors look at the bigger picture. They don’t care about why the stocks might be plummeting or whether there is a bullish or bearish trend in the market.
Their priority is to create small portfolios which grow at an optimum rate over a span of time. This ensures that the investors have money when they need it.
To better understand this, just take a look at the following example: suppose you have a child and you plan to save up for his higher education. You have around 15 years to save up enough money and obviously you wouldn’t be concerned about what is currently happening in the market.
In contrast, traditional investors focus on maximizing returns and mitigating risks. For them, the goal is solely on beating the index and recovering their initial investment while also making a hefty profit.
Additional Benefits of Goal Based Investing
It’s easy to lose focus when you are investing without any goals and have managed to make a lot of money. However, that’s less likely to happen if your goals are clear. If anything, you’ll just reinvest the additional money you earn in order to increase your overall savings.
Since you’ll have an idea regarding your future goals therefore, it will prevent you from underestimating the money you might need in the future. It also allows you prepare for the liabilities that might emerge in the future.
The best part is that, savings reduce the gap between the money you intend to spend and money you can afford to spend. You can use all the money that is left behind to do whatever you like.
Invest Money for Long Term—What to Keep in Mind?
Investing for long-term doesn’t mean that you invest your money and forget all about it for the next few years. There’s never any guarantee that your money will increase over time. Furthermore, you will also have to take time value of money into account.
Therefore, make sure that you do your homework before investing money. Just make sure that you keep your financial goals at the center and prepare your financial plan around it.