How to Start Goal-Based Investing in India: A Step-by-Step Guide for Beginners

If you have ₹10,000, ₹20,000 or ₹50,000 to invest each month, you may be tempted to start by choosing mutual funds or deciding how many SIPs to set up. 

Goal-based investing starts before that. 

This guide shows you how to turn a financial goal into a practical investment plan: by estimating the future cost, accounting for existing savings, calculating the required monthly investment and reviewing the goal over time. 

If you are new to the concept, read What Is Goal-Based Investing? How It Works, Benefits & Examples in India first. This guide focuses on how to put it into practice. 

A goal-based investment plan can be built by working backwards from what you want the money to achieve:

1. Define the goal: Be specific about what you are investing for.
2. Set the timeline: Decide approximately when the money will be needed.
3. Estimate the future cost: Account for how the cost may change over time.
4. Include existing savings: Add any money already set aside for the goal.
5. Calculate the monthly investment required: Work out how much may need to be invested from here.
6. Check whether it is affordable: Compare the required amount with what you can comfortably invest.
7. Choose an investment approach: Consider the goal timeline, risk profile and investment options.
8. Review the goal over time: Update the plan if the cost, timeline, savings or contributions change.

The sections below explain each step in more detail.

Start with the expense you want to prepare for. 

“Child’s education” may be too broad on its own. The amount needed for undergraduate studies in India could be very different from the amount needed for a master’s degree abroad. 

The same applies to smaller goals. A school trip, laptop, sports programme or course can each have a different cost and timeline. 

You do not need to know the exact amount at the start. A reasonable estimate is enough to begin, and you can update it later. 

The timeline has a big effect on the plan. 

A ₹10 lakh goal that is three years away will need a different monthly investment from the same ₹10 lakh goal that is 15 years away. 

The date also tells you how flexible the goal is. 

A holiday or hobby may be easier to postpone. A college admission date may leave much less room to delay the expense. 

For goals that are several years away, today’s cost may not be the amount you eventually need. 

Suppose a course costs ₹25 lakh today and the money will be needed in 12 years. At an illustrative inflation rate of 6% a year, the estimated future cost would be about ₹50.3 lakh. 

That figure is only an estimate. Inflation may be higher or lower, which is why long-term goals should be reviewed from time to time. 

You may already have money set aside for the goal. 

If your target is ₹25 lakh and ₹7 lakh has already been saved for it, that amount should be included before you work out how much more is needed. 

At this point, you should have three basic numbers: 

• the amount you may need  
• the amount already saved  
• the time left  

These give you a starting point for estimating the monthly investment. 

Once you know the target, existing savings and timeline, you can estimate how much you may need to invest each month. 

For example, suppose you need about ₹50 lakh in 12 years and have no existing savings for the goal. Using an illustrative annual return assumption of 10%, the required monthly investment would be roughly ₹18,500 to ₹18,600, depending on when the monthly investments are assumed to be made. 

The 10% return is only an assumption used for the calculation. Actual investment returns can be different. 

This calculation helps you see whether the amount you plan to invest is likely to be enough. 

If the goal needs around ₹18,500 a month and you are investing ₹10,000, there is still a gap to account for. 

To understand how the required monthly contribution changes with the goal amount, timeline and assumptions, read our guide to Goal-Based SIP: How Much Should You Invest Monthly?

If you are investing for more than one goal, add up the monthly amount needed for each one. 

If the total is higher than what you can currently invest, you may need to prioritize some goals or adjust the contribution, target amount or timeline. 

For more on this, read I Have Multiple Financial Goals: How Should I Split My Monthly Investments? 

Once the goal, amount and timeline are clear, you can think about where to invest. 

A goal that is two years away usually cannot take the same level of investment risk as one that is 15 or 20 years away. 

Your own financial situation and risk profile also matter. 

In an advised process, risk profiling and suitability are considered before an investment strategy is recommended. SEBI explains this in its guidance on Investment Advisers. 

A financial goal can change. 

The expected cost may go up. Your income may change. You may increase your monthly investment, add a lump sum or change the date. 

Goals for children can also become clearer as they grow older. An education plan made when a child is young may need to change once you have a better idea of the course, country or college they may choose. 

Review the plan when something important changes, and check long-term goals periodically even when there has been no major change. 

The aim is to see whether the amount saved, the contributions still to come and the time left are still enough for the goal. 

For a more detailed way to review progress, see How Do I Know If I’m On Track to Achieve My Financial Goal?

Nestvest helps parents plan and invest for different goals in their child’s future. 

Once a goal is defined, the plan can take into account its expected future cost, the time available, money already saved and the parent’s risk profile. 

Parents can then invest towards the goal and track its progress over time. How Nestvest Works 

How do I start goal-based investing? 

Start by choosing a goal, estimating how much it may cost and deciding when you will need the money. Include any savings already set aside, then calculate how much may need to be invested each month. 

How much should I invest for a financial goal? 

It depends on the amount you need, how much time you have, what you have already saved and the assumptions used for inflation and investment returns. 

How often should I review a financial goal? 

Review it when the cost, timeline, income or contribution changes. Long-term goals should also be checked periodically because the assumptions used at the start may change. 

Reviewed for financial accuracy by Ankita Shrivastava, Principal Officer, Nestvest.