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Are your investments on track for your goals?

Posted on 10 Jun 2021
Author: Sayan Sircar

Tags: Portfolio Review

3 mins read
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Regularly review your portfolio to know if you are on track for your goals

Progress towards financial goals

If you have followed all the previous posts on setting goals and starting investments then you know that regular reviews must be necessary to check if you are on track.

Review goals regularly

📚 Topics covered:

Track progress of a goal
A worked out example using a house down-payment goal

Track progress of a goal

Goals like cars, houses, vacations, college education costs and retirement expenses etc. all increase over time due to inflation. If the initial goal target was ₹ 10 lakhs today with 10% inflation, then in two years the goal value is expected to increase to around ₹12 lakhs. In reality, it could have become ₹ 12.5 lakhs or stayed close to ₹11 lakhs. In either case, a replanning is needed.

Markets do not go up in a straight line like a fixed deposit. Both equity and debt funds go up/down unpredictably and in most cases give a return very different from the expected return. If the target return was 8% for the first year but due to bear markets only 5% return was achieved, it would require additional monthly investments going forward.

The next process is rebalancing which is used for risk management to achieve one goal: over time, the risk of the portfolio needs to reduce as the goal comes closer. This is done via stepwise reduction of the equity exposure of the goal. Rebalancing:

allows systematically buying low, selling high
should be done at the portfolio level (all goals together to minimize trades and taxes)

See this detailed post regarding how rebalancing is done.

A replanning would require repeating the same process that was used to find the SIP amount

There are other ways of tracking investments at an asset level like the performance of individual funds which is covered here. Tracking progress of goals is one of the axioms of personal finance?.

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A worked out example using a house down-payment goal

Progress in one year

In the example above (which is from here), a house down payment goal is shown during the start of investing and a year later. The numbers move as:

cost of the house has gone up from ₹ 20 lakhs to ₹ 21.30 lakhs (higher than the 5% initially assumed)
SIP investment of ₹ 11,089 over one year has produced a return of ₹ 1.71 lakhs
due to the increase in the cost of the house, the SIP amount has increased by ₹ 1,439 monthly
the asset allocation has changed from 30:70 to 24:76 (change in the lump-sum equity figure w.r.t the corpus figure and will require a rebalancing based on the actual equity and debt returns)
The SIP figures have also changed with more to be invested in debt and less in equity

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Worked out case studies for goal-based investing

Case study: how can this middle aged investor with two children plan for retirement and children's goals?

This article shows how a single-income middle aged couple with two small children reach their retirement and children’s goals.
Case study: can this double income single kid family reach FIRE at 50?

This article shows how a double-income couple with a 2-year old reach their FIRE dream at the age of 50.
Case study: how a family in their mid-30s with a newborn kid can FIRE and invest in real estate?

This article shows how a double-income couple with a newborn child can invest for their future goals of FIRE and real-estate investment.
Case study: how this double income recently married family can perform DIY goal-based investment planning

This article shows how a young just-married couple can invest for future goals using the Arthgyaan goal-based investing tool.
Case Study: How should couples in their 40s with a new baby plan their financial future?

Did you welcome a bundle of joy in your 40s? This article will discuss ways of planning the child’s (and your’s financial future)
Case study: how this double income single kid family can perform DIY goal-based investment planning

This article shows how a very typical salaried couple with one child can invest for future goals using the Arthgyaan goal-based investing tool.

Previous and next articles:

<p>These are characteristics of assets that determine which are suitable for a goal.</p>

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Topics you will like:

Asset Allocation (20) Basics (8) Behaviour (10) Budgeting (11) Calculator (17) Case Study (6) Children (12) Choosing Investments (38) FAQ (6) FIRE (13) Gold (11) Health Insurance (4) House Purchase (17) Insurance (15) International Investing (10) Life Stages (2) Loans (9) Market Movements (13) Mutual Funds (29) NPS (6) NRI (13) News (9) Pension (8) Portfolio Construction (46) Portfolio Review (27) Reader Questions (6) Real Estate (6) Retirement (36) Review (12) Risk (6) Safe Withdrawal Rate (5) Set Goals (27) Step by step (14) Tax (37)

Next steps:

1. Email me with any questions.

2. Use our goal-based investing template to prepare a financial plan for yourself
OR
use this quick and fast online calculator to find out the SIP amount and asset allocation for your goals.

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