Goal based Investing Shifting the Mindset of Indian Clients in 2025

May 24, 2025

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Many Indian investors are preoccupied with chasing big returns and ask questions such as, "How much can I earn?" "How will this investment help me achieve my financial goals?" and "What are the best returns in the market?" While it is natural to want the highest potential profit, focusing exclusively on returns without a clear strategy is similar to sailing without a goal.

You will eventually get lost, even though you may surf the waves for a time. Investments based only on returns can frequently result in poor choices and unmet objectives. Rather, goal-based investing provides a more efficient and intelligent method by matching investments to financial objectives, which clarifies and secures one's path.

Let us read ahead to understand it more:

What is Goal-based Investing?

Goal-based investing means putting your money to work with a clear purpose. This means it directly connects financial objectives to your investment choices. Rather than aiming to "grow your wealth," you pinpoint your specific life objectives—such as saving for your kids' college, creating sufficient retirement corpus or preparing for your golden years—and shape your investment strategy to reach these targets.

Think of it like planning a family vacation. You would not just start driving and hope for the best. You would need to choose a destination, figure out the costs, plan the route and pack what you need. In the same way, goal-based investing helps you:

● Pick your destination (your money target)

● Work out how much cash you need (the required amount)

● Find the best path (choose the right investment options)

● Keep an eye on your journey (check and tweak as you go)

Let's say you plan to send your child to college in ten years. As a parent, you try to estimate how much it will cost, taking into account rising prices due to education inflation, and start investing systematically to be financially prepared when the time comes. Every rupee you invest is working towards a specific goal — not just sitting idle in the market without a purpose.

What is a Financial Goal?

A financial goal is a clear, measurable target you want to achieve with your money. This could be saving for retirement, paying for education or planning a vacation. To figure out how much you need for retirement, you can use the Dayco India Retirement Calculator. Just put in when you want to retire, how much you think you will spend as your monthly expenses and factor in inflation. This tool will show you how much money you should save to reach your retirement goals.

What's Fueling the Shift in Indian Investor Behaviour?

Indian investors have shifted towards goal-based investing due to the availability of digital platforms and financial apps that have expanded investment opportunities and financial learning to unprecedented levels, while demat accounts exceed 150 million, and new investors primarily emerge online.

Regulatory bodies and financial institutions have also implemented targeted educational programs, increasing investors' awareness about the dangers of pursuing high returns.

Recent market fluctuations have also caused people to become more wary, leading them to adjust their investments to match specific life objectives, such as funding their children's education or securing retirement plans. Investors can now utilise new technologies to customise their financial plans while monitoring them easily with the help of financial advisors. The evolution of investor attitudes becomes evident through the swift expansion of long-term SIPs alongside growing mutual fund participation across urban and semi-urban regions.

Methods That Indian Investors Were Following Earlier

Some of the methods that Indian Investors followed before:

● Chasing Past Performance:

Previously, many Indian investors chose investments based on recent high returns. They thought top performers would keep doing well. This approach ignored their financial needs, goals, and risk tolerance. As markets changed, these investors often felt let down. Yesterday's winners often caused losses or unmet hopes.

● Lack of Diversification:

Before, Indian portfolios focused heavily on one type of asset, like gold, stocks, or fixed deposits. This narrow focus made them vulnerable to problems in specific sectors. It also missed out on balanced growth across different assets. A portfolio without much variety increases risks. This made building wealth uneven, leaving investors open to financial shocks they could have avoided.

● Neglecting Investment Timelines:

Many people who invest money do not pay attention to how long they should keep their investments. They put their cash into things without thinking about when they would need it back, which causes problems. Sometimes, they have to take money out from the when the market is not doing well, or they cannot get their money when they need it. This mismatch often leads to poor returns and messes up their long-term money plans when unexpected things happen or the market takes a downturn.

● Ad-hoc Investing:

Investment decisions were frequently made ad hoc with no formal strategy. Investors placed their money in opportunities when they came to them, with little to no oversight or review process. Individual opportunities all came together in a portfolio that often tracked little or no progress towards their investment goals, resulting in disparate portfolios and situations where there was more opportunity to be gained by optimising the overall allocation in hopes of increasing returns and decreasing risk.

● Negligence of Risk Assessment:

Evaluating risk tolerance and personal situation was rarely incorporated into historic investing strategies. Many investors took on too much risk to pursue the biggest returns, while many others remained overly defensive and missed growth opportunities. Neglect of risk assessment resulted in portfolios that were either too ambitious or too conservative (with no volatility)—in both cases, undermining long-term wealth accumulation and financial security.

Importance of Goal-based Investment for an Investor

● Focused Investment: Goal-based investing provides you, the investor, with a clear and purposeful direction for your investment strategy. Instead of just a generic approach, it channels your resources toward well-defined financial objectives, ensuring that every investment decision is aligned with what you truly want to achieve. This focus helps you eliminate distractions and also increases the likelihood of meeting your goals.

● Customised Investment Plan: The ability of goal-based investing to customise investment programs to your particular circumstances is one of the main advantages. This approach creates customised solutions that meet your demands by considering your risk tolerance, timeline, and overall financial situation. Your investment strategy will be customised based on your goals and risk appetite.

● Disciplined Approach Towards Investment: Directly connecting investments with specific goals promotes a consistent and disciplined investing habit. By avoiding impulsive choices prompted by emotions or market volatility, this strategy helps you stick to your goal. Overall, goal-based investing keeps you focused on objectives, encouraging continual progress and sustained long-term financial success.

Steps to Follow with a Goal-based Investment Strategy

● Define Clear Goals:

Begin by identifying and listing all your financial objectives, such as funding your child's education in ten years, planning for retirement at sixty or planning for a vacation in three years. Assign a specific monetary value and a clear timeline to each goal. This clarity helps you prioritise, allocate resources efficiently, and measure your progress toward achieving each objective.

● Assess Risk Profile:

Evaluate your risk tolerance for every financial goal you set. Short-term goals, like a vacation next year, should be matched with low-risk investments to preserve capital. Long-term goals, such as retirement, can withstand more volatility and may benefit from higher-risk, higher-return investments. Understanding your risk appetite ensures your investment choices align with your comfort level and objectives.

You can check your risk-appetite here: Risk profiling questionnaire

● Choose Suitable Investment Products:

Select investment products that best fit the nature and timeline of each goal. For long-term goals, consider equities or equity mutual funds for potential growth. For short-term needs, opt for safer avenues like debt funds or fixed deposits. Medium-term goals benefit from a balanced mix of equity and debt, optimising both safety and returns.

● Create a Diversified Portfolio:

Diversify your investments across various asset classes, such as equities, debt, gold, and real estate, to spread risk and enhance returns. A diversified portfolio ensures that poor performance in one asset class does not significantly impact your overall wealth. This strategy provides stability and increases the likelihood of achieving your financial goals, regardless of market fluctuations.

● Monitor and Review Regularly:

Track the performance of your investments regularly and review your portfolio periodically. You should review your investment portfolio (and consider whether it is on the right track) at least once a year. This is the time to reassess your goals, risk profile, and market conditions to determine if your investments are still aligned with your investing objectives. If not, you should make the appropriate changes to your allocations or contributions (based on life changes or changing financial objectives) to keep you on the right path to meet your objectives.

The year 2025 sees Indian investors adopting goal-based investing, which drives them to follow tailored, disciplined approaches that match their unique financial objectives. Investors shift from return-chasing to strategic planning through digital access, combined with guidance of investment advisors and increased financial literacy. The shift enables better risk management while promoting long-term dedication and increasing the chances of reaching life objectives within changing economic and market environments.

-Suman Dan & Nini Prasad

-Dayco India

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Goal based Investing Shifting the Mindset of Indian Clients in 2025

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