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Why goal-based investing strategy for millennial is key

Remember, creating wealth is not about timing the market, but time in the market. The longer you stay invested, larger the corpus can be created

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When it comes to investing and planning their finances, people usually jump right in chasing maximum returns. While investments still continue to be an important aspect of the individual's financials, there needs to be a purpose to carry out those investment decisions and have some direction in mind. If there is no purpose to fulfil, you might never be truly satisfied with your investments.

Thus, having specific financial goals helps in assigning a purpose to your investments. It also motivates you to make wiser investments and not hasty ones and helps you prepare a well thought out financial plan. Here are a few strategies to keep in mind while goal based investing.

Priorities

Your priorities define the financial goals you may have. Every goal has a number behind it which represents the amount of money you need and time frame you have to fulfil that goal. Priorities give your goals the hierarchy of importance that makes it easy for you to start planning your finances.

You Take the Right Amount of Risks

Different goals need you to take different amounts of risk. For a short term goal such as car purchase, the volatility of the investments should be low. For a long term goal such as retirement the investment portfolio recommended comprises inflation beating higher risk investment avenue.

Magic of compounding

Time is the essence of life. It is the prime advantage that young people have when it comes to planning for their financial freedom and overall stability. When it comes to wealth creation via investment the amount of time one stays invested in is of principal importance. The sooner you start, larger the corpus you can accumulate.

We understand that rate of return also plays a very important role in accelerating the impact of compounding on your investments. But when we talk about power of compounding, we normally refer to the duration of the investment.

Investing is a term most people think about after their 30s but compound interest significantly favors individuals who start early. The distinct advantage is value of time. Thus we stay the younger you are – richer you can be. The amount may be miniscule, but it is pertinent to start investing early, be consistent and let the power of compounding show its magic.

Remember, creating wealth is not about timing the market, but time in the market. The longer you stay invested, larger the corpus can be created.

The writer is founder & CEO, TBNG Capital Advisers

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