Have you ever felt an incessant wish to travel around the world and then get utterly disappointed after looking at your bank balance? This always happens to us. There are so many places to visit and so many things to see, but we have so little time and yet less money. The bucket list of our dream destinations keeps on increasing with days and unfortunately, we do not have a never-ending source of income. So we invest well, save a bit and plan intelligently. Saving money is definitely important and we have some awesome tips for you to save money for travelling you can check out. However, one of our favourite means of financial planning is investing in mutual funds.
Why choose Mutual Funds to fund your vacations?
Mutual Funds are one of the best ways to invest your money and aim to get higher returns. The best thing about them is that you can invest in SIPs (Systematic Investment Plans). You can set aside a certain amount of money monthly and invest in SIP.
You can also think of taking a loan or using your Credit card for funding your vacations. However, a Personal Loan or Credit Card can have quite high interest rates. Further, defaulting in EMI can adversely affect your Credit Scores. So, if you are planning beforehand, then investing in Mutual Funds is a sensible option for potential better returns.
Choosing a Mutual Fund is also important for financing your vacation. As mentioned before, you can take the SIP route to invest in short term mutual funds and aim to generate an adequate amount of income without falling in debt.
How to go about Financial Planning?
1. Find out how much you need to spend for the vacation
The first step to your financial and investment planning is to find out how much you need for funding your vacation. The first step being how many vacations you plan to have in a year and where do you plan to travel. To be honest, not all Indian destinations are cheap and there are many international destinations that can be cheaper if planned well and in advance.
Keep in mind the flight costs, hotel expenses, meals and shopping expenses, transfers and others. Also keep in mind about the inflation while determining this cost. Now, find out how much you can invest each month to achieve the target amount.
After you have chalked out this information, it is time to look for the mutual funds that help you to generate the returns to finance your holiday. You can check out the SIP Calculator to find out how much you need to invest to achieve a particular goal in a particular time period.
2. Start a SIP in Mutual Funds based on your goal.
Once you know how much you want to invest, the next goal is to find a proper avenue for investment. Keeping the money in your Savings Bank Account is not a very good option as the maximum interest offered by banks these days are 3-5%. Secondly, you will have instant access to this money and you can end up spending them for other purposes. Believe me; we have done this a few times.
Recurring Deposits are a good option and they come in fixed tenures. They are safe options, but here too the rate of interest offered is in the range of 5-7%.
The next are the Mutual Funds where you can invest. However, since saving for travel is a short term goal, the approach for investment needs to be different from long term investments. Usually, Mutual Funds aims to offer higher returns for long term investments, but there are Funds that are suited for your short term goals as well. There are a few funds that you can consider:
Ultra Short Duration Funds
If you are planning your vacation within the next 6 months, you can think of investing in these funds. These mutual funds select debt instruments having investment periods for portfolios between 3 to 6 months. These are one of the options apart from savings bank accounts and FDs.
Low Duration Funds
These mutual funds select debt instruments having investment periods for portfolios between 6 months to 1 year. So if you are planning for a holiday next year, you can consider these funds.
Short Duration Funds
These are for duration 1 to 3 years.
What is an SIP?
Once you have decided where and how much to invest, start a SIP. As I mentioned earlier, SIPs can be a good vessel to realize your dreams. An SIP enables you to start investing from as low as Rs. 500 per month and helps you to reach a sizable amount over the time to reach your financial goals.
Apart from your travel goals, use SIP to reach your other life goals as well. L&T Mutual Fund provides a host of funds for most of your financial needs. As per your financial goals, you can choose to invest your money either in lump sum or through SIP.
Always have the habit of reading the scheme related documents before investing to understand the scheme type, investment patterns and the risk factors associated with particular investments and consult your financial advisor to understand the implication of any investment
Well, we love to travel and prefer to plan our finances to fund our travels. If you love to travel, lack of money should not stop you from achieving your travel dreams, or any other, for that matter. So plan your travel ahead, invest and save. It is really not that complicated. You can invest your money online without hassles. All it needs is a leap of faith!
Disclaimer: This information is for general information only and does not have regard to the particular needs of any specific person who may receive this information. L&T Investment Management Limited, the asset management company of L&T Mutual Fund or any of its associates; does not guarantee/indicate any returns/and shall not be held liable for any loss, expenses, charges incurred by the recipient. The recipient should consult their legal, tax and financial advisors before investing. The recipient of this information should understand that statements made herein regarding future prospects may not be realized or achieved.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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