We discuss how to plan for financial goals 5-10 years away. They are neither long-term to include equity nor short-term to avoid equity completely.
Financial goal planning is all about setting the right priorities. If my need is within five years, it would be prudent to avoid all equity. Equity returns are volatile regardless of investment duration. If I have, at best, five years to play with, then I may not have the time to allow markets to recover if I start with a string of bad returns. Or, if I am not careful, I could lose all earlier gains in a crash in the last year or two. So equity is best avoided.
Some people argue, “Then how do I beat inflation?”. Inflation is negative compounding. It needs time to work its dark magic. Typically, not much is going to happen in five years or less. So, one could easily combat inflation for short-term goals by choosing a safety-focused conservative portfolio and investing the appropriate sum.
For long-term goals – which we would like to define as ten years and beyond – a good chunk of equity is necessary, but not more than 50% to 60%, depending on the risk appreciation of the investor.
The situation with intermediate-term goals (greater than 5Y but less than 10Y) is tricky. Even expert investors are better off without any equity exposure for short-term goals. Even novice investors cannot say ‘no’ to equity for long term goals. For intermediate goals, however, the strategy would largely depend on the investor’s experience.
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Now watch Let's Get Rich With Pattu தமிழில் (in Tamil)!About The Author
Dr M Pattabiraman giving a lecture
Dr M. Pattabiraman (PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over 14 years of experience publishing news analysis, research and financial product development. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free, AUM-independent investment advice. Connect with him via Twitter(X) LinkedIn YouTube Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (Published by CNBC TV18) for DIY investors. 
This book helps you ask the right questions and find the right answers. It also includes nine online calculators to create custom solutions.
(2) Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want. 
Both the boy and girl versions of "Chinchu Gets a Superpower".
Most investor problems stem from a lack of poor decision-making. We made bad decisions and money mistakes when we started earning, and we spent years undoing them. Why should our children go through the same pain? What is this book about? As parents, what if we had to groom one ability in our children that matters not only for money management and investing but for every aspect of life? My answer: Sound decision-making. So, in this book, we meet Chinchu, who is about to turn 10. The story follows what he wants for his birthday and how his parents plan it, while also teaching him key ideas about decision-making and money management. What readers say! 
Feedback from a young reader after reading Chinchu Gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from a young age. The importance of money management and decision-making based on their wants and needs. Very nicely written in simple terms. - Arun.
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