If you have understood the importance of goal planning and are looking forward to allocating an investment instrument to a goal, you should know that often you may need more than one investment instrument for one goal. 

Usually, we begin by segregating goals on the basis of the time we have to achieve them. A financial goal that is a few months away is referred to as short term, ideally, the investment allocation to such goals is through stable return securities like deposits and debt funds. Anything more than three years is a long-term goal with a typical investment allocation to equity

However, it is possible that even for your long-term goal there is a mix of equity and debt and something similar for the short-term goals too. 

Can equity allocation be part of a short-term goal?

The final asset allocation really depends on what the goal is. If you have a defined goal where you know the precise amount of money required at the precise time a few months away, then this allocation can be through one type of product only. You need to have a stable return product like a liquid fund attached to this goal. You may want to diversify across two different liquid funds if the amount is too big, other than that you may not need more products. 

However, if your goal is to build an emergency fund or you want principal protection with some growth, you can mix and match both debt and equity products to arrive at the final asset allocation for this single goal. 

An emergency fund for example, may remain unused for a long period of time. Once you have accumulated a sufficient sum, instead of just leaving all the unused balance in low yielding debt, you can shift out 5%-10% into low-risk equity

This still remains as part of the emergency fund but with the potential for some growth as amounts remain unused. The same can be done with the specific goal of capital protection along with growth; invest in a liquid fund and move very small amounts at the end of every year into equity. Continue this for 10-12 years and you will be able to marry a short-term goal investment with growth over time.

Can debt be part of long-term goals?

Sometimes this becomes a necessity. While it’s easy to have a specific time frame for short term goals, the idea of time can get blurred when you consider long-horizon investments. For a goal that is say 10 years away, instead of having only one equity fund allocated to this, you can split the exposure 80% in equity and 20% in debt to maintain lower risk. You can even use gold as part of this asset allocation to bring some cushion and stability to returns across time. This way, if the time period is uncertain you have built-in some protection with the majority objective of wealth creation or growth. 

Moreover, for the sake of diversification, it always helps to have more than one fund allocated per goal, even if it is in the same asset class.

Goals need to be defined but do keep in mind that you can use a combination of products across asset classes in order to achieve the outcome in the most suitable risk-adjusted structure that works for you.