What to do if we reach the target corpus of a goal well in advance?

Published: March 16, 2022 at 6:00 am

In this article, we discuss what investors should do if they have already achieved their target corpus years before when they actually need the money. Today this may seem like an unlikely scenario for most young investors reading this, but over the years we have encountered so many people who are in this situation.

Investing for long term goals have four major tenets: (1) Be clear about why we are investing and when we need the money. Without this, we cannot determine the risk necessary.

(2) Start investing as early as possible. This again helps in how much risk we can take. (3) Invest as much as possible and increase investments each year as much as possible. Wealth is primarily built by capital and only then by returns.

(4) Manage risk systematically and continuously with a specific goal target in mind. The biggest challenge among these four is to invest what is necessary for the goal. This is why luck also plays a big part in both fixed income and equity investing.

For example, the interest rates can be high during the investment tenure. This often is bad news because inflation is also likely to be high and there is little money to spare. However, some people because of their income or lifestyle can combat this and still manage to invest close to what they should.

Build a complete financial plan with our Robo Advisory Tool. More than 1000 investors and financial advisors use it!
Get free money management solutions delivered to your mailbox! Subscribe to get posts via email! (Subscribers get exclusive discounts!)

New Tool! => Track your mutual funds and stocks investments with this Google Sheet!

On the other hand, in stocks, the sequences of returns can be favourable with one or two life-changing yearly returns (eg. 80% or 90%) which can compensate for our low income and therefore investments.

Many people baulk at the idea of goal-based investing because they think “regardless of all these calculations, at the end of the day, we can only invest what we can”. This may seem logical at first sight. However, practically, many have to reduce their spending habits to accommodate savings and investing. Only a rigorous calculation can make them appreciate this. What they do afterwards is up to them.

A natural way to push ourselves to invest more is by taking into account how the equity risk is managed in the years to come – gradually reduced in steps or continuously. See for example Retirement planning case study: Helping Somnath retire by 55.

Anyone who has been following the above tenets and had a bit of luck is likely to have close to their target corpus or accumulated more. What should be done then?

  1. It depends on the goal. It is best to continue investing until retirement if it is for retirement. There is no need to make any asset allocation changes other than those already planned.
  2. If it is children’s education/marriage, then there are some options.
    • Shift most of the funds from equity to fixed income and either stop investing or continue investing the same amount in equity and fixed income. The “extra” funds can be diverted to retirement later on.
    • Find the present cost of education, ensure that much is available in fixed income every year, and continue normally investing in fixed income equity.  Continuous reduction in equity is still recommended.
    • Stop investing and shift most of the funds from equity to debt. Whatever is left in equity is “extra” and can be diverted to retirement.
  3. For other goals, make the purchase early if convenient!

In summary, having achieved the target corpus early is a happy problem to deal with. This is usually the outcome of discipline and a bit of luck. As we continue investing, our risk appetite evolves. Some of us may want to continue investing in equity and some of us may want to shift most of the corpus to fixed income. Both options are fine. However, the ket is to ensure at any point in time, enough funds are available for the eventual purchase in safe and non-volatile assets.

Do share if you found this useful
Enjoy special discounts on our 10th anniversary until May 31st!  
Explore the site! Search among our 2000+ articles for information and insight!

About The Author

Pattabiraman editor freefincalDr 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 nine years of experience publishing news analysis, research and financial product development. Connect with him via Twitter or 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 for promoting unbiased, commission-free investment advice.
Use our Robo-advisory Excel Template for a start-to-finish financial plan! Now with a new demo video!  More than 1000 investors and advisors use this!
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 2800 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 what the market condition is!! 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.
Our new course!  Increase your income by getting people to pay for your skills! More than 675 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 who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts you and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
My new book for kids: “Chinchu gets a superpower!” is now available!
Both boy and girl version covers of Chinchu gets a superpower
Both boy and girl version covers of Chinchu gets a superpower.
Most investor problems can be traced to a lack of informed decision making. We have all made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, if we had to groom one ability in our children that is key not only to money management and investing but for any aspect of life, what would it be? My answer: Sound Decision Making. So in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parent’s plan for it and teach him several key ideas of decision making and money management is the narrative. What readers say!
Feedback from a young reader after reading Chinchu gets a Superpower (small version)
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 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 for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Did you know? We have more than 1000+ videos on YouTube to explore! Join our YouTube Community!

Want to check if the market is overvalued or undervalued? Use our market valuation tool (will work with any index!), or you buy the new Tactical Buy/Sell timing tool!
We publish mutual fund screeners and momentum, low volatility stock screeners .every month.
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. 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 from credible and knowledgeable sources before publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions, seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. It is also available in Kindle format.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! 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

Travel-Training-Kit-Cover-new This is an in-depth dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 199 (instant download)
Free android apps