life without goal is like a race without finish line, you are running nowhere!’ It also applies to your investment. No amount of investment will be sufficient unless you have a purpose for it. Also in Mutual Fund it is said, ‘Mutual Fund can fulfil your financial needs, but it cannot fulfil your greed.’
Often we see individuals losing their money in the equity market due to many reasons. But question comes, why do they make such mistakes? One of the answer is we humans are emotion driven. So at the time of taking decisions we tend to go with emotional choice over logical one. No matter how well we are informed about the need to invest for the long term, greed & fear cycle take us on the ride!
So what would be the solution of this challenge? Answer lies in using the same emotion for the purpose of investment. The moment we attach a goal or a purpose to our investment, it gets attached to our emotion. This helps in stopping a behaviour driven by panic or excitement during the volatile market.
For example you have targeted an amount for your child’s future. This is not like a normal saving. This has a purpose! So now you will not prefer to withdraw this money for the purpose other than your child’s future. Also, it will give you a motivation to invest for the long-term. You will not use this money to buy a car or to go for a vacation. This will also help you in rationalizing your spending. Because there is an emotion driven purpose attached to it, you will not get carried away to spend more. This will bring a discipline in you for your saving & investment. Also, clarity on your future need will help you balance your current aspirations. This type of planning involves mental accounting, which will encourage you for long term investment.
Thus, a goal is more or equally important along with fund selection. To know more about goal based investment with Mutual Funds and other products you can call us on 9879956949 or email us on hardik@niveshplanner.com.