Types of Financial Goals:
In general, financial goals are of 4 types, which are subject to change from person to person and situation to situation.
Near Term Goals
Goals which have a duration of a month to three months to fulfil.
Examples : Buying an Air Conditioner, buying a two wheeler, etc.
Short Term Goals
(less than three years). The closer you get to your goal, the less risk you generally want to take with the money you’ve already accumulated to pay for it. Because you plan to spend the money you set aside for short-term goals relatively quickly, you’ll want to focus on safety and liquidity rather than growth in your short-term portfolio. This means you’ll be more inclined to put your money into federally insured bank or credit union accounts or cash equivalent investments, which aren’t likely to lose much value in six months or a year.
Medium Term Goals
(three to ten years).Choosing the right investments for mid-term goals can be more complex than choosing them for short- or long-term goals. That’s because you need to strike an effective balance between protecting the assets you’ve worked hard to accumulate while achieving the growth that can help you build your assets and offset inflation.
Mid-term goals are typically those for which you need time to accumulate the money. Or they may be things you’re not yet ready for but are looking forward to. The more time you have, or the more flexible the timing, the more risk you can probably afford to take with your money. For example, you might want to invest some of your assets in stocks, either directly or through mutual funds or exchange-traded funds, because of the potential for a higher return that would allow you to reach your goals sooner. As the time frame for those goals gets shorter, you can gradually move some of those assets into more price-stable investments.
Long Term Goals
(more than ten years). For many people, the number one long-term goal is a financially secure retirement. But it’s also a goal with a long time horizon. When your goal is paying for college, for example, you think in terms of paying costs for four years—or perhaps a few more for a post-graduate or professional degree. But when you think about retirement, you have to think in terms of managing expenses for 15, 20, 30, or maybe even 40 years that you’ll be living after retirement. Since you’ll need income for that entire period, it is important to make your money work for you, and this means earning a rate of return that outpaces inflation and allows your principal investment to grow over time.
The general rule is that the more time you have to reach a financial goal, the more investment risk you can afford to take. For many investors, that can mean allocating most of the principal you set aside for long-term goals to growth investments, such as individual stock, stock mutual funds, and stock exchange traded funds (ETFs). Over time, you can gradually shift a greater percentage of your accumulated account value into income-producing investments such as bonds.
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