‘Fund’ your dreams with Mutual Funds

It is that time of the year when we are bombarded with offers on everything and anything under the sun (or shall we say, under the clouds considering the monsoon season). The offers/discounts certainly nudge the consumers to buy products they may or may not have bought otherwise. With a plethora of offline and online avenues to buy products and a steady stream of advertisements bombarding us, we are perennially in the search of reasons to buy things.

While rising aspirations are a by-product of a growing economy and increasing income levels, there has also been a rising trend of buying things on EMIs. Over the past few years, consumer debt has been aiding consumption, which to an extent is a function of better credit access. However, it is also likely to be driven by instant gratification sought by people, sometimes looking to mirror spending habits of others.

While, using leverage to buy products may be warranted in some cases; more often than not, it may be detrimental to your financial planning for the following reasons:

• Loans may lead to buying beyond one’s means
• Paying high interest for such loans
• Possibility of default/delayed repayment leading to lower credit score
• Lower savings and consequently, lower investments
• Risk of not being able to achieve long term financial goals

What is the solution?

You can invest in Mutual Fund through SIPs for achieving short-term goals like buying car, vacations and other discretionary spending. In other words, save first and spend later.

How to use MFs for short-term goals?

• Ascertain the corpus required and the time horizon
• Your time-horizon should be reasonable considering the amount you are investing. If your intended spending is more than 3 years away, you could do an SIP in hybrid funds like Equity Savings Funds, Multi Asset Funds or Conservative Hybrid Funds etc.
• If your intended spending is between 12 months to 3 years away, you could do an SIP in Debt Schemes like Corporate Bond Funds, Short-Term Debt Funds etc.*
• If your intended spending is less than a year away, you could do an SIP in Liquid or Ultra-Short Term Debt Funds.

*Please consult your tax advisor to understand the tax implications.

This will ensure that you avoid impulsive spending and plan your spending ahead of time. More importantly, it will also help you avoid dipping into your existing savings/investments for the temptation of instant gratification.

Next time you see an eye-catching advertisement coaxing you to buy that dream car/fancy gadget you don't need, take the opportunity to choose from wide array of Mutual Funds to finance your short-term goals.

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.