Axis Knowledge Nugget - 18

Align Your life goals with the right mutual fund investment

The first step in financial planning is goal creation. Be it a financial journey or a life journey, having a specific goal helps. You should set financial goals and then work towards achieving them. When you have clear goals, you know how to achieve your goals - how much investment is necessary, what instruments you should invest in, and which ones to avoid.

Mutual funds can help you achieve all your financial goals. The advantage of a mutual fund is that it offers you variety and flexibility. There are equity mutual funds that can aid wealth creation, debt funds have the scope to generate steady income, and if you want to keep some funds in cash, liquid funds can be your go-to vehicle.

Mutual funds and financial goals

Financial goals can be broadly divided into three categories, and for each category, there are specific mutual funds that work better than the others:

Short-term goals:

Your?financial goals ?that need to be achieved in the near future (3 months to a year) come under short-term goals. For example, you need to go on a foreign vacation with your family in the next six months. You plan to invest every month in it. Since the investment period is short, you may want to invest in mutual funds that are fairly liquid with the possibility of low volatility. You may opt for liquid or debt mutual funds for these goals.

Mid-term goals:

If your financial goals need to be accomplished in three to five years, they will fall under mid-term goals. For example, you plan to buy your dream car after four years. You have time in hand to buy your car. Hence, you may opt for mutual funds that have the possibility of generating steady returns. You may select a combination of equity and debt mutual funds. Within equity, you may consider investing in large-cap mutual funds. If your risk profile allows, you may also have a small allocation in mid-cap mutual funds. If you don’t wish to invest in equity and debt funds separately, you also have the option of investing in hybrid funds. Hybrid funds invest in multiple asset classes, the most common being a mix of equities and debt.?

Long-term goals:

Long-term goals are the ones you think will take you longer to achieve - 5 years or more. For your long-term goals, you need to be systematic and organized. Accumulating a corpus for a child's education, saving for retirement, or buying a holiday home are long-term goals. You may opt for?equity mutual funds ?for your long-term goals - have allocation in small, mid, and large-cap mutual funds for your long-term goals.?

With goal-based investment, selecting the right mutual funds becomes easy. You can assign your mutual fund investments to a particular financial goal and make your financial journey comfortable.

To Plan your Goal!

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Statutory Details:?Axis Mutual Fund has been established as a Trust under the Indian Trust Act 1882, sponsored by Axis Bank Ltd. (liability restricted to ?1 Lakh).?Trustee:?Axis Mutual Fund Trustee Ltd.?Investment Manager:?Axis Asset Management Co. Ltd. (the AMC)?Risk Factors:?Axis Bank Ltd. Is not liable or responsible for any loss or shortfall resulting from the operation of the scheme.

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.