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What if your equity-linked goal was slated for 2020?

Your two options are either to reduce the amount required for the goal and secure it now in a stable return investment or you can extend the time for achieving the goal.

Do you find yourself in the middle of this equity market correction with a long-term financial goal hanging in the balance, just six months away? The sudden, sharp correction in domestic equity indices came unannounced and may have caught many investors on the wrong foot.

If you hadn’t planned well and shifted your long-term goal money which, is needed in the next few months, out of equity and parked safely in a fixed return investment, you may be looking at the possibility of letting go of that financial goal. 

It could have been avoided by proper planning, but if that hasn’t happened, do you still have a way out?

Stretch your time or lower the expectation

Your best bet now would be to try and stretch out the time required to manifest this goal. For example, let’s say you had pencilled in a long-term goal eight years ago for September 2020 and were regularly investing in equity mutual funds towards building a corpus.

If you haven’t already shifted this money into a more stable investment option, with just 5 months to go, you are probably looking at a big gap in the money needed towards this goal. But don’t give up altogether.

What you can do instead

Your two options are either to reduce the amount required for the goal and secure it now in a stable return investment or you can extend the time for achieving the goal. 

In the meantime, depending on your alternative saving balances, your monthly inflows you may choose to leave the funds partially invested in equity to take advantage of any potential recovery in market prices over that period of time. 

Let’s say your goal was to buy your own house by Diwali 2020. Assuming you don’t want to take a loan towards this house, you would be short of the amount you had initially estimated. 

However, it’s also possible that home values have fallen and you can actually reduce the original goal figure you have earmarked for buying a house without compromising too much on the quality or type of house you intend to buy. If this is the case, you can withdraw funds from equity and keep them in a short-term fund until you have to pay for the house.

If this is not possible in the location you live, think if you can stretch the buying of this house by another 12-18 months. In the meantime, depending on your alternative saving balances, your monthly inflows you may choose to leave the funds partially invested in equity to take advantage of any potential recovery in market prices over that period of time. 

Similarly, if the goal was your child’s higher education expense, you will have to reconsider the educational institute marked out for this or think about your child taking a gap year and trying again next year. This stretching of time will give you an opportunity to make up the gap in cashflows required for the goal if the alternative of lowering the tuition expense is not working out. 

It is perhaps the worst-case scenario to have a long-term goal just a few months away and not having planned to secure that amount sooner. Nevertheless, there is always a choice and whether you choose to stretch your time or lower your goal expectation (amount) will depend on your individual circumstances and the options available. 


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