Advantages of goal-based investing

Determining your goals and prioritising them will help you to invest better in the stock market. You may have a number of goals to achieve and goal-based investing helps you to achieve them by investing in options specific to each goal. This strategy can help you achieve your goals in time. 

Once you set your financial goal you can work towards achieving them. These are the points to follow while making a financial plan:

You should divide your goals into short-term, medium-term, and long-term goals. The short-term goals can be achieved within a period of 3 years, medium-term goals can be achieved between 3 - 5 years and long-term goals can be achieved after a period of 5 years. You should rank your goals according to their priority and look for the best investment options to achieve your goals.

You should make an investment strategy based on your goals. Find the best investigation options based on your risk appetite and the tenure you are looking for. For your short-term goals, you can choose aggressive options and for your long-term goals, you can pick risk-free investment options. You should compare the risk involved and the return on each investment before investing.

The first step to achieving your long-term goals is to invest regularly and choose the right type of investment options. You can go for a Systematic Investment Plan (SIP) and start saving each month to reach your financial goals.

Investing goals | Image Resource: m1.com

Benefits of goal-based investing

When you set your financial goals it will help to make your long-term vision clear. You will be able to invest across the different stages of your life and in various investment options. For example, if your goal is to buy a house in 10 years then you will have to invest for the long term. You can invest in mutual funds as they offer low risk and high returns.

Once you have decided on your investing goals you will be able to build an effective investment strategy. 

When you attach life goals to your savings you will be motivated to save and work harder to achieve your goals. When you set your goals you will be saving for a tangible outcome.

With financial planning, you will know the amount of money you need to save each month in order to reach your goals. This will stop you from overspending.

When you are working to achieve a goal you will plan better, save more and invest better.