To make the most out of the goal planning on Goalwise, it’s important to understand some terms that may be confusing for beginners but are crucial.
You must have seen terms like Target amount, Projected amount, Current amount etc. on the goal plan and may have wondered what’s the difference. Let me explain each of them with an example so that you can plan your goals better.
Let's assume my goal is to purchase a car worth Rs. 10 Lakhs in 5 years. As per Goalwise's risk profile questionnaire my risk profile is Moderate.
Current amount that is shown on the top is simply the current value of your investments. Based on the market fluctuations the price (NAV) of the funds keeps changing. So current value of your investments also change accordingly.
Since the screenshot is from a fresh goal, my current amount in this goal is 0.
Target Amount: Since I want to save Rs. 10L in 5 years, my target amount will be Rs. 10L and my plan duration is 5 years.
Advanced: You can also tick the checkbox to adjust the target amount for inflation. My goal is to purchase a car that costs Rs. 10L today. After 5 years, the price of the same car will be more than 10 lakhs. As shown, at 7% p.a. inflation it would actually be around 14 lakhs.
Once I have set the appropriate target and duration in my goal plan, it will show me the suggested SIP amount to achieve my target.
The suggestion given by Goalwise is a SIP of Rs. 14,000 for 5 years to achieve this target.
When I enter Monthly SIP amount as Rs. 14,000, I can see the following values:
Projected Amount: Based on the assumption of annual 7% returns for Debt funds and 12% for Equity funds, Goalwise algo projects that if I invest Rs 14,000 per month for 5 years, this is the amount I’m likely to get at the end. In this case my projected amount is Rs 10,33,906.
This is the average case. The projection graph below shows the above average case and the below average case as well for my investments.
If there was any current amount in the goal (eg for already invested goals), that would have also been taken into account to calculate the projected value.
On-track: Since my projected amount of Rs 10,33,906 is greater than my target amount of Rs 10 lakhs, Goalwise’s Goalsense algo shows that I am on track to achieve my goal in 5 years if I continue to invest Rs. 14,000 per month.
Planned Investment Amount shows you the total amount that you will be investing in 5 years. So for Rs. 14,000 per month for 5 years my planned invested amount will be Rs. 8,40,000 (14000x12x5).
That was all about the numbers. Next you can check the funds that we recommend you to invest in and the asset allocation glide path.
Recommended Funds: This table shows our current fund recommendations for your SIP as per the risk level you have selected. In my example, my selected risk level is Moderate. So the Goalwise algo has allocated my SIP amount of Rs. 14,000 in the ratio 50% Equity (amongst 4 best equity funds) and 50% Debt (amongst 2 best debt funds).
Asset Allocation suggested at the time of initial investment for my Moderate risk profile when I have 5 years left is 50% Equity and 50% Debt.
But this won’t remain the same throughout the goal period.
As the goal progresses, we will shift your equity investments gradually to debt (via portfolio rebalancing) so that your goal gets continuously de-risked as the time remaining becomes shorter. This prevents any adverse market movements from derailing your goal towards the end.
The graph below shows the recommended change in asset allocation over time (aka the glide path).
I hope this helps you in planning your goals better. Happy investing :)