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Meeting financial goals in spite of market volatility

Tips to meet your Financial Goals
Tips to meet your Financial Goals

Meeting financial goals in spite of market volatility

Meeting financial goals in spite of market volatility

Setting short and long-term financial goals is one of the most important steps towards becoming financially secure. After all, saving or investing without an aim means working towards nothing specific, which can lead you to spend more money than you should or save money in such a manner that it could have grown better through an investment. While meeting financial goals is easier said than done, a proper plan can help you go about it in a structured manner. Use our financial goal calculators to plan your finances better. Check out now!

However, the best-laid plans too can go wrong. Even after taking care of all factors like asset allocation, portfolio diversification and so on, you have market conditions to reckon with. And the market may not always be favourable to your financial goals. However, this is no reason to abandon your goals, because there are multiple ways to get around a downturn.

Here’s outlining a few practical ways to meet your financial goals despite market volatility.

Meeting long-term goals by investing in instalments

Investing is risky in a volatile market, but the risk can be managed by making investments in instalments. Suppose an individual has invested a lump sum amount of one lakh rupees in a mutual fund scheme at a net asset value of a hundred rupees. If the market goes into a downturn after this, the entire investment gets negatively impacted.

A good way of investing in such market conditions is to fragment the investment corpus into instalments. For instance, the same one lakh rupees can be invested in a fund by investing ten thousand rupees over ten months. It offers the benefit of cost averaging while minimizing the impact of a volatile market, as the investment has been spread over ten months.

In fact, having a SIP (Systematic Investment Plan) can prove to be beneficial for all high-risk investments, such as mutual funds and direct equities. But, even in this case, the chosen investment instruments should align with your risk appetite. Meeting long-term goals becomes easier by investing in instalments. Find , which helps you create wealth for the long term irrespective of market swings. Explore now!

Maintaining sufficient liquidity and an emergency fund

Rash decisions taken by investors are among the main reasons why financial goals are disturbed, and things deteriorate further during adverse circumstances. However, when an emergency fund is maintained with adequate liquidity, it can help you avoid financial distress even in the most trying times.

The definition of adequate liquidity, in this case, may vary from individual to individual. So, it is very important that you understand your financial situation and your risk profile to determine the amount. The rule of thumb is to have an emergency fund that can meet your daily expenses for at least six to nine months.

You can keep this emergency fund either in liquid funds or instruments that can be easily redeemed without loss in value. You still need to ensure you gain a return that exceeds the ongoing inflation rate.

Timely reassessment of financial goals

There needs to be some room for adaptability in your financial goals, keeping in mind the fact that market forces can change from the time when the goals were set. Stay up-to-date with the latest changes in the economy, market, and asset classes with Standard Chartered Market Insights. Click here!

For instance, suppose you have a goal to buy a home after three years, and property rates at the time of setting the goal were 1000 INR per square feet. You had expected the rates to reach not more than 1500 INR when you finally bought the property. But somehow prices have gone way beyond that mark in three years. If your income does not let you increase the size of the financial goal, it’s time to make some changes to the goal itself. You could look for properties in more affordable areas of the city or buy a smaller house that still fits your budget.

Reassessment of your financial goals helps you in maintaining the much-needed balance between short and long-term goals. Updating the size of the goals from time to time is key to making them realistic.

Staying low on debt

When the investments that you’ve planned to achieve your goal don’t perform well due to market volatilities, there is always the temptation to take a loan to bridge the gap to your goal. However, it is best to stay low on debt and avoid taking on new loans to finance your goals. Remember that all loans come with a repayment due date. You will find it hard to repay your debt if your income and investments do not grow in line with expectations. It is never a good idea to get stuck in a cycle of debt that makes you feel like you never have enough money. This can leave you vulnerable in the face of the major risks of life.

Importance of rebalancing the portfolio from time to time

Setting goals and making investments to achieve those goals is just the beginning. You need to pay close attention to the progress of your investments and evaluate your portfolio periodically. It’s best to do this at least once in six months.

A half-yearly review does not necessarily mean changing the portfolio altogether. Most of the time, it’s only checking to make sure that you’re on the right track. The reviews also let you know if there is a need to rethink your asset allocation because of the rise or fall in elements of the portfolio beyond expected levels. The criticality of your financial goal is important in this case too. For non-critical goals like a bigger car or a foreign vacation, you can afford to wait and watch if your portfolio overperforms or underperforms. For critical goals, always follow proper asset allocation and rebalancing to ensure that you stay on track to achieve them.  Standard Chartered provides comprehensive wealth offerings that make investments easier and stress-free. Find out more!

Putting proper financial goals in place and having strategies to attain those is as important as it is to strengthen those goals by varied means. When you adopt pragmatic planning and take a farsighted approach, your strong financial discipline will help you tide over market downturns.

Disclaimer

This article is for information and educational purposes only. It is meant only for use as a reference tool. It has not been prepared for any particular person or class of persons. The products and services mentioned here may not be suitable for everyone and should not be used as a basis for making investment decisions. This article does not constitute investment advice nor is it an offer, solicitation or invitation to transact in any investment or insurance product. The value of investments and the income from them can go down as well as up, and you may not recover the amount of your original investment. Prior to transacting, you should obtain independent financial advice. In the event that you choose not to seek independent professional advice, you should consider whether the product is suitable for you. You should refer to the relevant offering documents for detailed information. Standard Chartered Bank is an AMFI registered distributor of select mutual funds and third-party financial products and does not provide any investment advisory services.

Mutual Fund Investments are subject to market risk. Read scheme related documents carefully prior to investing. Past performance is not indicative of future returns.