Stepping stones to financial planning: Goal planning and asset allocation
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Most of the above random investments start with the intention of tax saving, capital protection, avoiding risks, etc. But, they don’t have any end objective in place like a specific financial goal attached to them.
Random investing approach versus goal planning approach
A lot of people make random investments due to various reasons. Some of these include:
1) Tax saving: People are keen on saving tax. Hence, they end up making investments at the last minute without applying much thought to it. However, tax saving should be one of the objectives of investment planning and not the only one.
2) Capital protection: Fixed deposits attract the largest share of people’s investible surplus because people are concerned about the safety of their money. But, people don’t realise that fixed deposit interest is taxable which reduces their overall return. In a high inflation scenario, this lower return may result in negative returns after considering the impact of inflation. 
3) Risk aversion: In general, people perceive mutual funds to be risky as the big market falls like those during Covid-19, demonetisation, sub-prime crisis, the dot-com bubble burst, etc. made big headlines. These headlines scare away people. This makes people flock to gold and real estate as safe investments. In the short-term, it may be true that stock markets and mutual fund schemes are risky. But in the long-run, with asset allocation, proper selection of mutual fund schemes, and regular review, the risk can be mitigated and there is a potential to earn inflation-beating high returns.
In such a scenario, it is easy to get confused mid-way, lose direction, and end up in disappointment. Imagine a scenario wherein one fine morning you decide to set on a vacation without a final destination in mind, adopt any mode of transportation available, decide to make a stay arrangement when you reach the destination, have no trip duration in mind, have no sightseeing schedule in place for the destination location. 
Well, we don’t need to tell you how chaotic such a vacation will be and how it will end in utter disappointment, as you can figure it out yourself. The end result of random investments can also be something similar. To avoid such a situation, you should adopt a goal-planning investment approach.
Goal planning
You can go for a goal-planning approach for your investments with the help of a qualified and professional financial advisor. The systematic goal planning approach recommended by most financial advisors will involve the following steps:
a) Identifying your financial goals, 
b) Prioritising them, if the cash inflows are not sufficient to start investing for all of them together,
c) Making a financial plan for each goal based on risk profiling and asset allocation. The financial plan involves calculating the amount required, the investment time horizon available, the expected rate of return, the regular amount required to be invested, etc.
d) Implementing the financial plan
e) Doing a regular review of the financial plan and making suitable changes, whenever required
f) Making appropriate changes in asset allocation as the investor’s age increases and specifically nearer to the goal timeline
g) Hand Holding by the financial advisor till the financial goal is accomplished
Financial goals
Goal planning is a focused way of achieving important financial goals like:
a) Building a fund for child’s higher education and marriage, 
b) Building a fund for retirement,
c) Buying a house or repayment of home loan and/or any other loan/s,
d) Quitting a job and starting own business,
e) Annual domestic/foreign vacation,
f) Achieving financial independence,
g) Building a fund for regular charity, etc.
Since there is an end goal attached to the investment plan, it will motivate you to stay focused. Goal planning makes sure you enjoy the financial planning journey and celebrate the accomplishment of the financial goal at the end. Goal planning also makes sure the emotions of greed and fear don’t distract you.
Asset allocation
One of the important aspects of goal planning that plays a crucial role in achieving financial goals is asset allocation. The asset allocation strategy involves investing your money in different asset classes in varying proportions. This mix depends on factors like your age, risk appetite, investment time horizon, etc. Asset allocation can be made across equities, fixed income, real estate, gold, etc. We have all heard of the famous investment advice: “Don’t put all your eggs in one basket”. Asset allocation helps in reducing the concentration risk.
Importance of asset allocation
Asset allocation strategy works on the principle that different asset classes have no perfect correlation. Hence, when one asset class goes down, the other asset classes make up for it. In the short-term, asset allocation provides diversification and stability to the portfolio. In the long-run, asset allocation helps accumulate wealth and achieve financial goals.
Implementation of asset allocation strategy
Depending on your age, risk profile, and other factors, a financial advisor can make a strategic asset allocation plan for you. Over time, depending on the performance of various asset classes, the asset allocation mix will change. You can sit with the financial advisor to review your asset allocation on a half-yearly or yearly basis. If one of the asset classes, say for example equities, has done exceptionally well in a particular year, the portfolio will skew in its favour. During the review, you have to do the rebalancing of the portfolio in such cases. This means you will have to sell some equities and re-distribute the proceeds among other asset classes so that the asset allocation mix reverts back to the mean.
Role of a financial advisor
A qualified and professional financial advisor can be the difference between you achieving and not achieving your financial goals. A good financial advisor can help you in identifying your financial goals, assessing your risk profile, framing asset allocation strategy, making financial goals, mapping your investments to your goal plan, and handholding you till you achieve your financial goals. 
Technology has removed geographical barriers and brought the best of wealth management advisors like Glide Invest well within our reach. Glide Invest is a SEBI Registered Investment Advisor (RIA). It is backed by the Motilal Oswal Group, synonymous with equity investing and wealth creation for millions of Indians over the last 30 years. Glide Invest is backed by the Motilal Oswal group, a name synonymous with equity investing and wealth creation for millions of Indian investors.
On the Glide Invest platform, you can take the risk survey to understand your risk profile, specify your goal, for which you will get your personalised investment plan, and start implementing it. Glide Invest recommends the appropriate asset allocation, investment in direct mutual funds, and handholds you till you achieve your financial goals. All you need to do is to download the Glide Invest App and get started.
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