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When Mutual Funds are Linked to Your Financial Goals

Posted On Wednesday, Nov 21, 2018

Are you like…Rohit, who decides to redeem his investments when markets decline and doesn’t see any improvements? OR Roy, who decides to redeem his investments when markets rise and wishes to safeguard his gains? OR Raj, who decides to continue with his investments no matter which route the markets take?

If you have invested money towards your financial goals, be it long-term mid-term or short-term, it is imperative that you stay the course and keep your long term plan in mind irrespective of market swings. Moreover, if you have matched your investments with your financial goals, you would want to see the end result by the end of your investment period. How do you create a comprehensive investment plan that fits your lifestyle and nature? Do you have a plan to stay committed in good times and bad? Whatever be your objective to save for the future, the key is to find investments that match your financial goals by investing in products that will generate enough returns.

Below are 5 key factors that will help you match your investments to your financial goals:

1. Be realistic when jotting down your financial goals: It is important to list down and prioritize goals that are specific and measurable. Financial goals vary from person to person. Before you can begin to manage your money, you need to identify what is important to you. This helps you create a foundation to decide what you plan to do with your money. Get a pen and paper and write down what is important to you and use your list to help you determine your financial goals for your money. You should do this today if you haven’t done it already.

2. Determine your time horizon: Ideally you should divide your goals into three ‘savings buckets’: Short-term goals (accomplishable within a year), mid-term goals (accomplishable within one to five years), and long-term goals (accomplishable in five-plus years).

• Short-term goals usually span between one to two years. You can easily invest your money in a savings account to accumulate a small amount of interest – hopefully not erased by inflation - thereby having enough money for that new mobile or laptop that you wanted to buy.
• Mid-term goals are more or less like short-term goals with the added condition that you’d need the discipline to stay put for a little longer, between say two to five years. For eg. The desire to purchase a new car would fall in this category.
• Investments into equity mutual funds usually fall into the category of long-term goals. Parking your money in such investments has the possibility to generate tremendous benefits after five-plus years. With equity funds it’s important to have an idea of where you want to be several years down the line. For instance, if your financial goals are to build a retirement corpus to live a comfortable retirement life or if you are keen on sending your children for higher education abroad, then equity based investments are advisable if such goals are far away.

3. Decide your asset allocation and assess your risk tolerance: Your risk tolerance is your level of comfort with the ups and downs of investing. Make no mistake – markets will fall and rise again at some point. In order to make the best investment for you as an individual, you will want to find assets that match your risk tolerance. Identify the assets (such as equity, debt or gold) that would make up your portfolio according to your goals, risk appetite and investment horizon. Allocate funds in more than one asset class.

4. Pick the right investments that match your goals: Investments need to be matched correctly with your goals. For instance, if you plan to invest in long term-goals such as your child’s education or buying a house, equity oriented mutual funds should be the preferred choice of investment, as they have an ability to provide good returns in the long-run.

5. Evaluate your portfolio from time to time: Just as you do regular health check-ups from time to time, it is necessary to regularly review your portfolio consisting of your goals and investments. Portfolios need to be reviewed periodically to ensure you are investing in the right instruments. Investors need to take into account factors like inflation, changes in the standards of living, addition of financial dependents which may lead you to increase, amend or remove certain goals. When new goals are considered, investors need to start investing more depending upon ones age and risk appetite.

Financial GoalsTime HorizonAsset Allocation
Wealth Creation10 yearsEquity mutual funds
House Down Payment
3 - 5 yearsEquity/Debt mutual funds / Multi Asset Allocation Fund
Retirement20 yearsEquity mutual funds
Car2 - 4 yearsEquity/Debt mutual funds / Multi Asset Allocation Funds
Vacation Abroad2 yearsEquity/Debt mutual funds / Multi Asset Allocation Funds
Children’s Education15 yearsEquity mutual funds

Note: This table is for illustrative purposes. Investors should consult their financial advisors before taking any financial decisions.

Not to forget, it is better to have gold as a good diversifier along with your asset allocation. In our view, as a retail investor, your portfolio can have anywhere between 10-20% in gold investments.

Conclusion...

Be like Raj who does not let his emotions take over by responding in an intellectual way by keeping his portfolio on track for the long run. If you need help to be like Raj, as always, take the time to speak to your financial advisors so that you can learn how to get the most from every investment to reach your short-term, medium-term and long-term goals the right way.

Call us on 1800 - 209 - 3863 / 1800 - 22- 3863 Or email CustomerCare@QuantumAMC.com


Product Labeling
Name of the SchemeThis product is suitable for investors who are seeking*Riskometer
Quantum Multi Asset Fund

(An Open Ended Fund of Funds Scheme Investing in schemes of Quantum Mutual Fund)
• Long term capital appreciation and current income

• Investments in portfolio of schemes of Quantum Mutual Fund whose underlying investments are in equity , debt / money market instruments and gold
Quantum Long Term Equity Fund
Investors understand that their principal will be at Moderately High Risk
* Investors should consult their financial advisers if in doubt about whether the product is suitable for them.

Disclaimer, Statutory Details & Risk Factors:

The views expressed here in this article are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments.

Mutual fund investments are subject to market risks read all scheme related documents carefully.

Please visit – www.QuantumMF.com to read scheme specific risk factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the schemes objective will be achieved and the NAV of the scheme(s) may go up and down depending upon the factors and forces affecting securities market. Investment in mutual fund units involves investment risk such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the sponsor / AMC / Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited. The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.

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Mutual Fund investments are subject to market risks, read all scheme related documents carefully.