HAVING a financial goal is just one part of financial planning for any investor.
The bigger part is the investment horizon set to achieve the financial goal and the identification of the right investment option to achieve the goal.
For those wanting to systematically build a corpus with an investment horizon of one year, whether it is for a foreign holiday, or payment of fees for the child that will go to school or college next year or down payment for a home loan, here are a list of options that one can consider.
Mutual funds: Since the horizon is one year, it is better if one invests in shortterm debt fund or floating rate funds like HDFC Shortterm Opportunities Fund or Templeton India Short-term India Fund. Since the corpus is built step-by-step over a period of 12 months, the returns would also be modest at about 6 per cent, he says.
Mutual fund fixed maturity plans (FMP) which offer about 9.5 per cent post tax returns and quarterly investment plans that offer 7.5-8 per cent returns are also attractive for such investors.
Bank recurring deposit: Those who are risk averse or unfamiliar with the mutual funds business could consider traditional options like recurring deposits. With interest rates on the higher side, one could expect average returns of 6.5 per cent on bank recurring deposits for a systematic monthly investment. Gold schemes by jewelers: If one wants to save to buy jewellery for a wedding, gold saving schemes offered by most jewelers in the country would be a good option.
Through these schemes one can save a specific amount systematically over a period of a year after which the jeweller himself contributes month or two's installment and the amount can be reimbursed for an item of jewellery.
Gold has given about 16 per cent return on a yearly basis over the last ten years.
So for those wanting to buy gold such schemes would do well.
Company FD's: Many company's like Shriram Transport Finance, HDFC, First Leasing Services, ICICI Home Finance, Apollo Hospitals offer fixed deposit schemes for time period ranging between six months and five years. Most of these companies promise average returns of 8.25-11 per cent.
But the ones with the highest return promised is not necessarily the one that has high ratings. So one should check the ratings for these schemes.
Chit funds: Most financial planners do not advice investing in chit funds as it is very difficult to authenticate the claims on returns made by the companies and these are not under the direct control of the RBI. One should look at the past history of these chit fund companies before investing, they say.
A big no to equity: One year is too short a period for investing in equity markets. So is would be wise to rule out equity-based investment options like stock or commodity trading, equity-based mutual funds and ETFs for those with a one year horizon.
