Goal based investing is a clever way to fool ourselves to remain invested. Yes you read it right. Our minds by nature is undisciplined and impatient. We fall into the random trap of comparison and expectations very easily. In such a case goal based investing can be very helpful to help us trust the process of compounding – doesn’t matter if it takes 2 year or 20 years. If the goal is in my intertest and it is i who has set the goal to satisfy my desires i will make sure the i do not disturb my investment strategy.
This is the crux of goal based investing. Let s understand how goal based investing can chnage the game in our lives.
It gives you a GOAL
As the name suggests, Goal based investing’s whole motive is that it gives you a goal. If we have a goal in mind, can see its progress in our portfolios, and make necessary changes to or strategy, we can surely achieve our financial goals.
Goal brings in a healthy Ambition
Over here i could have used the word “Ego” in place of ambition. But Ego is not good to have in any area of our lives. When there is an ambition we work towards it and hence there is complete involvement on my part to make sure i fulfill my ambition. Of course i would know that in a financial world nothing is guaranteed and even the safest investment instrument can falter, but that gives me all the more reason to do my due diligence before investing a single penny. Hence, when i am ambitious about my financial goals, i spend time with it and participate in it.
It is I who create this GOAL
Now this is the most beautiful part in goal based investing. Who gives us this goal? It is myself who has this goal that after 5 years ill buy a SUV and so for that i will invest. I could have taken the easy way which majority of Indians do – purchase on EMI. But i chose to take this goal of 5 years to invest money and then buy my dream car. This instills self control and self discipline.
How to do Goal Based Investing
Goal Based Investing is all about investing with a Goal based mindset. Hence all rules of investing applies here but with an attached goal. Here are three ways to do goal based investing
Start with small Goals
A very effective way to train our minds for goal based investing is to always start with smaller goals. Lets say you have a desire to wear an Armani exchange watch which will cost your 15,000 rupees. Its not a necessity but a luxury that you want to own. Again, you can buy it or order online sing EMI, but instated you take a goal of purchasing that same watch in 5 months and do a monthly SIP of 3000 rupees in a Debt Mutual Fund. Once you keep doing this, automatically your brain will train you to invest before buying any depreciating asset.
