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25 July, 2024 12:54 IST
Financial Planning
Easy check to know if your investment strategy is adequate
Source: IRIS (28-SEP-18)

Traditionally, as Indians, most of us are habituated to savings. Everyone saves to fulfil some dream or goal for the future, though most people never consciously plan what the goals are or how they will be reached.

The big question to ask therefore is, am I saving enough for my goals? And if I am, am I investing in the right set of instruments that will help me reach goals? To answer these questions, ask yourself...

Why am I investing?

In other words, what are the most important goals for you or your family that needs planning? In our experience as financial coaches, the biggest goals invariably tend to be the son or daughter's higher education, their lovely wedding and a happy retirement for oneself. Younger couples may plan for a house or a car.

Goal-based investing is always successful because when you set a goal you are emotionally invested in the process and tend to save diligently to meet the goal.

How much money do I require?

The next step is to estimate how much is really enough, i.e. how much money you need to accumulate to achieve your future goals. There are two elements of significance in this estimation, viz, time and inflation. Start with how much money is required to fulfill the goal today. Next think how far your goal is from today and then factor in the rate of inflation.

The impact of inflation does not come intuitively to most people. Make a guess; if today you have a decent lifestyle with a monthly budget of Rs. 40,000, how much would you require to maintain a similar lifestyle in 30 years?  Rs. 3.20 lakhs a month, considering an inflation rate of 7% p.a. This means by the time you retire at the age 60, you'd need Rs. 7 crores to provide for your spouse and you till 85 years.

Most people tend to underestimate the impact of inflation and guess that a corpus of about Rs. 2-3 crores will be more than sufficient to maintain their lifestyle post retirement. But the good news is, with the right strategy and an early start this goal with such a staggering figure can be achieved. That's right, with even modest contributions in the right portfolio of mutual funds, this corpus can be achieved comfortably.

What will be an ideal portfolio suitable for me?

To construct an optimal portfolio, one more very important factor to be considered is your risk profile. You need to consider how comfortable are you with investing in volatile assets. Further, you need to factor in your capacity to take risk, based on your current financial situation, existing investment portfolio and financial goals.

If you are an aggressive investor your portfolio can be a combination of equity funds and balanced funds. On the other hand, a conservative investor's portfolio should mainly consist of debt and balanced funds. In addition to diversifying across the different assets, it is advisable to diversify adequately within each asset class.

Even if one does plan well and build a portfolio, it is advisable to consult a financial coach, who can provide valuable inputs from his expertise. At the end of the day, your most important personal goals or those of your family are at stake. Therefore, engage a good advisorand be on the path to meeting all goals with a robust strategy.

(Authored by Amar Pandit, CFA, Founder of

Disclaimer: IRIS has taken due care and caution in compilation of data for its web site. Information has been obtained by IRIS from sources which it considers reliable. However, IRIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. IRIS especially states that it has no financial liability whatsoever to any user on account of the use of information provided on its website.

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