In the year 2020, the Nifty started at around ₹12,000, fell to roughly ₹7,500 and then bounced back to around ₹14,000 by the end of the year. No one could have predicted that a pandemic would hit and cause such volatility in the stock market at the beginning of that year.
As investors, you have little control over the fluctuations in the stock market. Even if you invest in smart portfolios that give good returns, the stock market does not care about how your personal portfolio is performing. And so sometimes it might be the case that you need to access your funds well before you achieve your desired returns. As they say – the market can remain irrational much longer than you can stay solvent.
So, what do you have control of? It’s actually quite simple – you can create a plan and work strategically to meet your financial goals. Rather than worrying about the ups and downs of the market, how about creating a strategic plan to save up for a trip to Goa or to study abroad or to buy a car.
But there is a SMART way to create a financial goal. Your goal has to be:
- Specific – The more narrowly defined your goal, the better you will know the steps to achieve it
- Measurable – If your goal is measurable and has a money value, you can track your progress against it.
- Achievable – It is always better to make sure that you can reasonably attain your goal. If it’s not achievable, it will always be out of reach
- Realistic – You should have confidence that you can realistically achieve your goal with all the resources available to you.
- Time-bound – without a time value, a goal becomes open ended, and you could lose the motivation to achieve it
Once you have set a SMART financial goal, what you have in hand is a money value and a time horizon. You can use these factors along with your risk and return assumptions to work backwards and calculate how much money you need to invest to meet your financial goal.
What does this mean? If you want to save ₹200, say 10 months from now, that means you should save up ₹10 per month for the next 10 months. That’s it at a basic level, but on top of this you can add in your risk and return assumptions to arrive at a better conclusion.
What you must keep in mind here is the attainable and realistic aspect within this. We would all love to say that we will save ₹100 and then double that within 6 months to reach ₹200. But if we bet on this happening as a short-term strategy, we might be setting up ourselves for disappointment.
In this way, we hope you will be able to create SMART goals and invest strategically in a way that can help you achieve your financial priorities. We have done an investing Masterclass on how to achieve your financial goals linked below, do check it out to dive deeper into this subject.