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Photo: iStock
Photo: iStock

Move to debt assets as your goal nears

As you get closer to the goal you have set, it becomes critical to further align the investments

I have three main financial goals. The first is five years away, the second is 10 years away and the third is around 15 years away. I have invested in a total of eight schemes. Can you explain how money should be moved as I near my goal ? When and where should I move my money? Should the entire money be moved or only a certain portion of it?

—Ridhima Vermani

It is important to do goal-based planning as it can help you choose the right asset classes in accordance with your goals.

However, as you get closer to the goal you have set, it becomes critical to further align the investments. So, say your investments are in the equity asset class. Over time, you have got closer to the goal, and now it is just two years away. As an investor, you need to reduce your equity holdings by using a staggered plan like a systematic transfer plan (STP), and move to debt over the next 12 months or so.

This is aimed at reducing the volatility in your portfolio, which is true of an equity asset class. At the same time, if in accordance with your goal, you have invested in a safe asset class only, then the portfolio is already aligned and it does not require any changes.

I have been saving for my child’s higher education abroad for the past 10 years. However, he received a full scholarship and will also get a stipend amount. Any shortfall in his monthly expenses, I can meet from my salary. I had saved close to 40 lakh for this goal. My other goals are on track. The corpus is currently invested in six schemes. How and where should I reinvest this money?

—Vinay Chopra

It is indeed good that your child got a full scholarship for his foreign education. And with all your goals on track, you can invest these funds in an equity-based asset class.

You can review all your existing six schemes and evaluate whether any scheme needs to be changed. If you can afford to increase your risk level in your portfolio, you can do it with this corpus since you don’t have any immediate requirement for the money.

Alternatively, if you want to reduce the risk for any of your existing goals, that can also be done by allocating a part of this corpus for that particular goal.

Surya Bhatia is managing partner of Asset Managers.

Queries and views at mintmoney@livemint.com

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