Making investments for your future financial goals may require a certain degree of technical know-how and the willingness to put a considerable amount of effort as well. Once you’ve identified your financial goals, you must pay heed to your risk appetite and weigh it against your investment objectives. These objectives must be met by ensuring:
Investments’ security – The investment instruments and modes must be well-regulated, thus safeguarding your interests as an investor. They must also provide you with ample liquidity as and when needed.
Capital growth – They must provide you sufficient returns, in line with your expectations and financial goals.
Capital multiplication – The funds must be invested in a way that they get aggressively allocated to deliver the most optimum returns.
Once your objectives have been set right, you must determine the corresponding time periods in order to arrive at the right investment vehicles. Please keep in mind that the returns from your investments may vary significantly depending on their tenures. Please also note that the risk taken in case of long-term investments is quite different compared to the risks incurred in the short-term investments. You can invest into four different term periods as follows:
Immediate term – Investments made for 1 year or less fall into this category. The money market instruments serve as the good investment option for meeting the corresponding immediate term goals, as it provides sufficient liquidity and low sensitivity to the market risks, compared to the equity investments.
Short-term – Investments made for more than 1 year, but less than 3 years are considered short-term in nature. The risks taken in such short-term investments are comparatively higher than the immediate term investments. These investments should include a good mix of money market income funds, equity investments and short-term debts for increasing the returns’ percentage. However tempting it may seem, high exposure to equity is something that’s not recommended in such short-term investments.
Medium term – Also referred to as mid-term investments, these have a timeframe of 3 to 8 years. There are a number of options you can explore for these investments, for instance, bond index funds, stock index funds, balance mutual funds and more. Investing into good-quality equity funds is recommended for medium-term goals as the market volatility factor gets adjusted over such investment periods. Partial debt-based investments are also suggested to provide the much-needed stability.
Long-term – Any investment made for a tenure of more than 8 years is referred to as long-term investment. You must invest for the long term in order to meet your bigger life stage goals such as purchase of a house, children’s education, daughter’s wedding etc. Considering their tenure, these investments are good for high equity exposure and deliver comparatively higher returns than the medium, short and immediate term investments. It may also be a good idea to invest into some well-diversified mutual fund/s for the long term, so as to enjoy appropriate exposure to both equity and debt, and for countering the market volatility related factors.
Mutual fund investments are subject to market risks, read all scheme related documents carefully.