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Goal Based Investing

Asset Purchase

As you progress through your career, you might want to purchase an asset. It may be a car, house, a piece of land or anything else. Mostly, these assets are purchased through a loan. Though you avail a loan to fund the purchase of the asset, we are required to make a down-payment, which is an own contribution.

If we plan well in advance, we can manage this down payment through regular savings and investments through SIPs. And, if we plan it effectively, we can also reduce the extent of loan which we wish to avail for the asset purchase. This will help us save on interest burden and give us more flexibility.

The process involves

Steps involved in asset purchase

At most times, this financial goal has a relatively shorter time horizon when compared to the other goals like child's education, daughter's marriage or retirement planning. Typically, these types of goals have a time horizon of 3-7 years. Hence, time horizon plays in an important role in determining the asset allocation of the portfolio.

Ideally, the longer the time horizon the higher the allocation needs to be towards equity funds. If the time horizon is short, say 2-3 years, it is advisable to keep at least 80% of the portfolio in debt funds.