Here’s why you shouldn’t be chasing returns, but aiming for financial goals


The temptation for higher returns is hard to sustain. Returns are often misleading due to market volatility, which is nearly impossible to predict. In this article, we’ll explore why targeting returns is futile, while goals are the ones to watch. An investment with no return can be fatal and you can end up in a financial mess. Sometimes the returns may be positive but not enough or not worth the hassle paid. Each individual has a unique lifestyle, which he does not want to change. Therefore, depending on the lifestyle, you can determine how much you will need when you retire. Now all you need is to invest in avenues that match or exceed the expected rate of return.

Why goals are important

Each financial goal requires a different investment time frame, and each time frame gives you the risk that can be afforded. When we have goals, we know our fund needs and the time frame in which we need to achieve them. This simplifies our task rather than thinking about timing the market and being afraid of losing money. Each financial goal could be assigned a financial asset, such as a fixed deposit or liquid fund that could help meet our short-term needs like vacations abroad. Similarly, a mid- or large-cap fund could help define long-term needs. Diversification could prepare you for any risk, so that if one investment is losing, the other could balance it out. Keeping a moderate return expectation could help you plan and lead a peaceful life. Whereas, when you target the return, it can lead to frustration, unhappiness, and a miserable life. Plan early, stick to it, and review it regularly. This way, you are more likely to achieve your goals and that too without too much stress.

Why not returns, why goals?

When looking for yields, you always jump into hasty decision-making, generated by the hype of an asset class. When choosing an asset to invest, analyze its advantages and disadvantages and its risk indicator. After due consideration of the investment objective coupled with the risk appetite, make a choice. However, this does not happen when chasing returns, the reason being the fear of missing out. We are easily influenced and often find ourselves in undesirable situations.

Let’s look at this through an example. Rahul invested in the stock market on the recommendation of his friend that he can get rich in no time. Rahul invested in equity just before the Covid crisis. Soon the stock market crashed and Rahul had to sell his entire investment with a huge loss. No one predicted that a pandemic would cause the market to crash. However, after two years, people have learned the lesson in the hardest way possible. Anjali, who started investing in mutual funds at the same time, has now nearly doubled her investment and is well on her way to achieving her goals.

It is impossible to time the market. However, achieving financial goals seems practical and sensible through planning, investment, consistency, and vigilance.

(Viral Bhatt is the founder of Money Mantra – a personal finance solutions company)

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