A reader says, “I am a regular follower/reader of freefincal and started my financial planning journey in 2020 after reading your book “You Can Be Rich Too with Goal-based Investing.”
“I have followed a unified portfolio approach for all the long term goals, like
retirement (26 years from now), child higher education (15 years from now) and marriage (~24 years from now)”.
“Can you please guide me on reviewing a unified portfolio for such goals? For example, if my corpus today for this portfolio is X lakhs, how do I know how much % of this X lakhs belongs to each goal and how to adjust SIP accordingly?”
In an independent portfolio approach, each long-term goal has its own asset allocation schedule, target corpus, required investment amount and instruments. Most investors prefer this planning mode, and the freefincal robo advisor tool independently automates the asset allocation schedule (risk reduction strategy) for each goal.
In a unified portfolio approach, all long-term goals are clubbed together in the same portfolio. Only one asset allocation schedule and one investment amount are required. Periodically, withdrawals are made to meet other long term goals. The final withdrawal is retirement. As schematically depicted below, the robo-advisor tool allows unified portfolio planning and plans for staggered withdrawals for each goal.
Join 32,000+ readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! (Link takes you to our email sign-up form)
🔥Want to create a complete financial plan? Learn goal-based investing? Exclusive access to our DIY tools? Increase your income with your skills? Use this link to enjoy massive discounts on our robo-advisory tool & courses! 🔥
I prefer the independent portfolio approach. That is simpler and cleaner as each goal is managed independently. The total investment amount required for all long-term goals is often lower in the unified approach because it considers future cash flows.
For example, if my son’s college entry is five years away and retirement is 15 years away, I can invest more for my retirement after five years when I pay for my son’s college. This is implicitly taken into account in the unified approach.
I am not a fan of this assumption, but it offers hope to people who find the total investment amount for all long term goals daunting. Also, one must not mix short-term and long-term goals in a unified approach. The reader has rightly only considered long-term goals.
So, how do we go about reviewing the unified goal-based investment portfolio?
We can review only if we plan properly first. For example, if you need money for goal A after 10 years, goal B after 17 years and goal C (retirement) after 25 years. You can plan for withdrawals a few years before each goal. The first step is the asset allocation schedule. How are we going to change equity allocation down the line? This is what is suggested by the robo tool.
Then, we must ensure a staggered withdrawal plan is in place. For example, if you need money for goal A after 10 years, goal B after 17 years and goal C (retirement) after 25 years. You can plan for withdrawals a few years before each goal.
The freefincal robo tool recommends withdrawing 60% from equity and 40% from fixed income for 3-5 years before each goal. This cash flow schedule will be made available to the user, and crucially, the total investment amount needed to meet all goals will take this withdrawal and the asset allocation schedule shown above.
With this in place, we can start investing. Once a year, we will have to take a call on the asset allocation for the next year and rest the portfolio accordingly.
Then, we must check if the corpus growth is as expected. We can DIY this projected growth, including withdrawals, or use what the robo tool gives us. We can then update the corpus value yearly to determine whether we are on track. This goal-based investment portfolio auditing tool can be used.
We are on the right track if the asset allocation is per the planned schedule and the actual corpus is close to the expected corpus. Otherwise, we can decide whether to invest more or change the allocation.
Another way to check if we are on the right track is to redo the calculation once a year during the review. All is well if the investment required aligns with the planned schedule or lower.
The reader asks, “If my corpus today for this portfolio is X lakhs, how do I know how much % of this X lakhs belongs to each goal and how to adjust SIP accordingly?”
In a unified portfolio, we do not make such allocations. There is one corpus that grows, and we make staggered withdrawals from it starting a few years before each goal deadline.
Use our Robo-advisory Tool to create a complete financial plan! ⇐More than 3,000 investors and advisors use this! Use the discount code: robo25 for a 20% discount. Plan your retirement (early, normal, before, and after), as well as non-recurring financial goals (such as child education) and recurring financial goals (like holidays and appliance purchases). The tool would help anyone aged 18 to 80 plan for their retirement, as well as six other non-recurring financial goals and four recurring financial goals, with a detailed cash flow summary.
🔥You can also avail massive discounts on our courses and the freefincal investor circle! 🔥& join our community of 8000+ users!
Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds, and ETF screeners, as well as momentum and low-volatility stock screeners.
You can follow our articles on Google News
We have over 1,000 videos on YouTube!
Join our WhatsApp Channel
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Have a question? Subscribe to our newsletter using the form below.
- Hit 'reply' to any email from us! We do not offer personalised investment advice. We can write a detailed article without mentioning your name if you have a generic question.
Join 32,000+ readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! (Link takes you to our email sign-up form)
About The Author
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 13 years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), LinkedIn, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free, AUM-independent investment advice.Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,500 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Increase your income by getting people to pay for your skills! ⇐ More than 800 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner seeking more clients through online visibility, or a salaried individual looking for a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you. (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our book for kids: “Chinchu Gets a Superpower!” is now available!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting a side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media organisation dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact Information: To get in touch, please use our contact form. (Sponsored posts or paid collaborations will not be entertained.)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our YouTube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
Published by CNBC TV18, this book is designed to help you ask the right questions and find the correct answers. Additionally, it comes with nine online calculators, allowing you to create custom solutions tailored to your lifestyle. Get it now.Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
This book is designed for young earners to get their basics right from the start! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.Your Ultimate Guide to Travel
This is an in-depth exploration of vacation planning, including finding affordable flights, budget accommodations, and practical travel tips. It also examines the benefits of travelling slowly, both financially and psychologically, with links to relevant web pages and guidance at every step. Get the PDF for Rs 300 (instant download)