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How Goal-Based Investing Helps In Wealth Creation

Team BankBazaar
·4-min read

Identifying your financial goals to achieve them in a time-bound manner is the first step towards wealth creation. Major aspirations like buying a house, funding children’s higher education and building an adequate retirement fund get fulfilled after goals are set in advance to achieve them. Financial planning helps you in achieving set targets realistically, with your hard-earned money.

While starting our careers we tend to follow an investment pattern based on our learnings and guidance from people around us. Financial targets do not take centre-stage at this point so investments revolve around traditional instruments such as fixed and recurring deposits. While these two are still considered a safe zone to park your money and earn some interest, they may not help you accumulate the wealth needed for significant events in a defined time frame.

Goal-based investment helps in creating a significant corpus depending on your short-term, mid-term and long-term goals. When your investments are goal-based, you are more prepared to deal with future financial needs. In this article, we look at the importance of goal-based investments in wealth creation.

Helps In Measuring Your Goals

Identifying your goals give a fair idea about the amount of funds needed to fulfil each one of them. Your evaluation of the money required for fulfilling your short-term, mid-term and long-term goals will help you work towards the funds needed to accomplish it. For instance, if education costs Rs.5 lakh today, you must calculate how much it will cost 10 years later and add the necessary inflation or deflation rate to it given the market trend. The major factors to keep in mind is the sum of money required, the time period you have to acquire it and how much will you need to save and invest every month to create that wealth.

Helps You Rely On Savings More Than Debt

A loan helps in fulfilling our critical life goals and also comes to our rescue during any financial emergency. With different types of loans available in the market at competitive interest rates, relying on them to fulfil the crucial financial need is a common practice. Taking a loan with a solid repayment plan to build an asset is a great idea but borrowing without any specific need or borrowing more than your repayment capacity may result in disruption of your finances and may eat up your funds for other financial goals. You may also land up in a debt trap and may lose your hands on your precious assets.

Instead of opting for a loan to meet your short-term or long-term goals, you can achieve them through the wealth created through the smart and disciplined investments funded by your savings. This is where a gold-based investment approach helps.

Controls Impulsive Expenses

Having a goal-based approach inculcates a habit of discipline in saving and investments. It helps you differentiate between wants and needs. As a result, you control your impulsive purchases and focus on using the funds for investments to help your money grow. It keeps you away from dipping into your savings for your discretionary spends and encourages you to use it wisely for wealth creation. Having goal-based investments can help you identify and quantify your long-term goals and not spend on short-term or low priority purchases.

Identifying The Right Investment Tool For Each Goal

Goal-based investments guide you in choosing the right investment tools. Once your goals and timelines are defined, you can easily identify your investment instruments and strategise accordingly to give you desired returns in a specified time to fulfil your aspirations. Choosing investment instruments that are not aligned with your goals can end up in under or over investment. Knowing the objective of your investment and the time frame required to achieve your goal can help you to opt for those investment avenues which can help you meet the goals according to your risk appetite, liquidity requirements, etc. For short-term goals, opting for a fixed deposit could be an option. However, for long-term goals, top-rated equity mutual funds, along with small savings schemes like Public Provident Fund, could be useful.


With the help of goal-based investments, you can effectively track your investments to align with your goals. You will know exactly how much you have invested and the period of the investment as well. If some investments are not performing, you can always shift to a different investment which is performing better in the market. Wealth creation is a common goal for most investors. Goal-based investment is an effective and systematic way to generate wealth., India’s leading online marketplace for loans and credit cards.