Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2019 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
The key to achieve your financial goals - Outside View by PersonalFN

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

The key to achieve your financial goals
Oct 25, 2013

"Motivation is what gets you started. Habit is what keeps you going."- Jim Ryun (an American former track athlete and politician).

Every individual has certain dreams and ambitions. It is a time tested theory that achieving success requires discipline and determination. Even a child needs discipline and regular monitoring to achieve his goal of being a good student. Hence, as a grown up individual you definitely need to invest regularly and wisely to meet your financial goals. The most convenient and one of the easiest ways to accumulate wealth is by investing regularly and in a disciplined manner. The following illustration will help you understand this better:

Example 1). Mr. Singh has a 6 year old son. He wants his son to pursue higher studies after his graduation. The cost for the same is Rs 10 lakh today. What will be the cost after 15 years when Mr Singh's son is ready to pursue higher education, and how much will Mr Singh need to save for the same?

Son's Age 6 years
Cost of Education in today's terms Rs 10 lakhs
Time left for Higher Studies 15 years
Inflation Rate 10% p.a.
Cost at time of Post-Graduation course Rs 41.77 lakhs
Amount Mr Shah needs to invest per month Rs 8,362

The table above depicts that cost of pursuing the post-graduation course after 15 years would be Rs 41.77 lakhs. And if Mr Singh starts saving today for his son's higher studies, then the amount he would need to save and invest per month would be Rs 8,362. However, if Mr Singh delays and starts saving after 10 years, then he would need to save almost 6 times more i.e. Rs 51,149 per month for 5 years in order to accumulate the desired corpus.

So, the above example explains that by investing regularly you will be able to create a large portfolio which could be extremely difficult to replicate with a single instalment.

Infact, investing small amounts regularly will also prove to be light on your wallet and reduce the burden of defraying a huge amount in one shot from your bank account. Hence saving and regular investing can enable you to meet all your financial goals in life in a comfortable manner. Procrastinating saving for even small goals of life can create a financial crunch later.

Investing regularly and in prudently in the right investments also gives more time for your investments to grow. Hence you further benefit from the impact of compounding. The money that we invest regularly manifests on itself and grows. However to gain the most out of the compounding effect you must start saving and investing early. The earlier you begin investing and the longer you remain invested, the more compound interest you will be able to earn i.e. greater would be the power of compounding.

Another advantage you obtain by investing regularly is protection from 'Investment Risk'. This is the risk which can arise if investors buy when the markets are expensively valued and sell when the markets are cheap. Most investors are not capable of forecasting markets over the short term. They do not know when is a good time to buy or sell. Hence by investing regularly you spread your purchases and hence can take advantage of the market highs and lows. This is nothing but rupee cost averaging.

Often while investing, many investors seek the perfect entry and exit point of the market which amounts to nothing but market timing. However, it is often very difficult if not impossible to regularly be correct in predicting market fluctuations, and thus know exactly when to enter and to exit. Timing the markets, apart from requiring full time attention also requires expertise in understanding economic cycles and market scenarios, which you may or may not possess. Regular saving and investing makes market timing irrelevant and enables you to exploit market opportunities.

Speaking of regular investing, Systematic Investment Plans (SIPs) inculcate a very good habit of discipline in investing. It ensures that you save a certain amount every month regardless of the state of the markets and removes the need for timing the markets. Furthermore, since you are investing on a fixed date every month or quarter in SIPs, you also get the benefit of cost averaging over long time periods.

PersonalFN believes that as the desire to meet life goals provokes one to invest; all investors must ideally adopt a regular and disciplined approach towards investing. Infusing a regular investing habit will help your financial dreams come true - be it buying a dream house or a car, providing good education to children, getting them married well, or even your own retirement. You might be surprised at how planned and regular investing can help you establish the requisite corpus exactly when you need it. Hence if you wish to achieve this financial nirvana, discipline and regularity must be your key traits as an investor along with selecting the right investment avenues.

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.


The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

Equitymaster requests your view! Post a comment on "The key to achieve your financial goals". Click here!


More Views on News

Sorry! There are no related views on news for this company/sector.

Most Popular

The One Real Estate Stock to Buy Now(The 5 Minute Wrapup)

Feb 13, 2019

The real estate sector is ready to make a comeback. This is the stock to consider buying.

Don't Be Afraid of the Market; Buy Stocks Like This One(The 5 Minute Wrapup)

Feb 14, 2019

During this tough period in the market, a contrarian approach holds huge potential upside for this Smart Money Secrets stock.

Small Caps Under Seige: Could This Be A Once-in-a-Decade Wealth Creating Opportunity?(Profit Hunter)

Feb 14, 2019

Don't let the dark clouds hovering over small caps scare you into hiding; it will rain gold as sentiments recover. Indeed, there is a blood bath. And if you are a first time investor, the correction is deep enough to scare you out of markets.

The 4-Point Plan to Accelerate India to a 10 Trillion Dollar Economy(The 5 Minute Wrapup)

Feb 12, 2019

Two questions I have been eagerly waiting to ask you ever since Budget 2019 was announced.

The Train to 'Small-Cap-Profits Land' is Back on the Station!(Profit Hunter)

Feb 15, 2019

Why its great news that prices for small caps over the last few days have been falling like there's no tomorrow.


Get the Indian Stock Market's
Most Profitable Ideas

How To Beat Sensex Guide 2019
Get our special report, How to Beat Sensex Nearly 3X Now!
We will never sell or rent your email id.
Please read our Terms