Jul 2022
5 mins read

7 Ways to Evaluate and Update Your Investment Goals

In investments, what’s right for you today might not be the best choice tomorrow. Most investors don’t realise this, or realise it too late. That’s why it is essential to evaluate and update your financial goals from time to time, and recalibrate your investment portfolio accordingly. Here are 7 ways to do it right:

Revisit your goals every year

Your goals from a few years ago may not be relevant now. Or you might have already achieved some of them, and it doesn’t make sense to continue investing towards them. Set a date each year when you can evaluate your short-term, mid-term, and long-term goals.

point 1

Evaluate your goals after every milestone

Each milestone could be a turning point in your life. Whether it's the birth of a child, or a wedding, it changes your priorities. This makes it an opportune moment to reflect on your goals and investments.

point 2

Evaluate your goals when your income changes significantly

A change of job, a promotion, a job loss, or just taking a break from work, all translate into significant changes in your income. Evaluate your goals in these scenarios to see if they still align with your new income level.

point 3

Evaluate your goals when your debt-to-income ratio changes significantly

Banks and financial institutions don’t usually approve your loans if your debt-to-income ratio breaches the 40% mark1. This means you can't take loans easily. Changes in your debt-to-income ratio could also be a reminder to realign your financial goals to your investments.

point 4

See each goal as a stepping-stone to another

It is crucial to align your goals such that every goal you achieve gives you a boost and helps you get to the next step. For instance, if your goal is retirement planning, other goals such as buying a house, going debt-free, or earning a passive income can be waypoints that help you move towards the ultimate goal of a worry-free retired life. 

point 5

Analyse your portfolio performance frequently

Check returns from your investments and compare them to leading schemes or benchmarks from the same category, to assess how your investments are performing. For instance, if you have invested in flexi-cap mutual funds or multi-cap mutual funds, compare the returns to top-performing schemes from the same category and the benchmark returns. Note that past performance may or may not be sustained in future.

point 6

Re-check portfolio allocation

Any changes to goals, budgets and timelines will also require adjustments to portfolio allocation. Consider a diverse mix of investments, including mutual funds, equity, gold, real estate, debt etc. For instance, your portfolio should ideally move towards debt and fixed returns instruments as you get closer to retirement age.

point 7

Investment is a life-long exercise, and you must regularly update your investment goals to ensure they reflect your current situation and objectives. Follow these tips to maintain an investment portfolio that will strengthen your long-term financial future.

1. https://economictimes.indiatimes.com/wealth/borrow/how-does-your-debt-to-income-ratio-affect-your-home-loan-eligibility/articleshow/45503096.cms?from=mdr

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