Goal-Based Investing

Investments

Goal-based investing means aligning each investment to a specific life goal -- child's education, home down payment, retirement, car -- rather than investing generically. Each goal has its own timeline, risk tolerance, and required monthly SIP.

In detail

Goal-based framework:n1. Define goal: specific amount in today's valuen2. Calculate future value: adjust for inflationn3. Determine timeline: years to goaln4. Choose instrument: based on horizon (equity for 7+years, hybrid for 3-7, debt for under 3)n5. Calculate required SIPn6. Review annuallynnBenefit: you never dip into "retirement SIP" for a vacation because each goal has its own dedicated investment.

Formula

SIP required = Target corpus x r / [(1+r)^n - 1] / (1+r)nr = monthly rate, n = months

Real-life example

🇮🇳 India example

Arjun has 3 goals: child education in 12 years (Rs 25L today, future value Rs 50.4L at 6% inflation), home down payment in 3 years (Rs 10L, no inflation adjustment), retirement in 30 years (Rs 3 Cr corpus). Each gets separate SIP: Rs 1,800/month (education), Rs 2,740/month (home, in liquid/hybrid), Rs 8,500/month (retirement in equity).

Frequently asked questions

How many investment goals should I have? ▼

3-5 major goals maximum. More than that becomes unmanageable. Typical: emergency fund, child education, retirement, home purchase. Prioritise: retirement first (longest runway, biggest corpus), then others.