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Medium-term Goals – Education, Vehicle, Holidays

The bridge between "Now" and "Retirement". Medium-term goals range from 1 to 5 years. Here, we can take calculated risk to beat inflation, but safety is still important.

1. Strategy: Hybrid Approach

Unlike short-term (all cash) or long-term (all equity), medium-term needs balance.

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2. Common Goals

A. Buying a Vehicle (3 Years)

  • Instrument: Recurring Deposit (RD) or Corporate Bond Fund.
  • Reason: You need exact amount on a specific date. Market crash is not acceptable.

B. Dream Vacation (18 Months)

  • Instrument: Ultra Short Term Fund or RD.
  • Reason: Short duration doesn't allow equity risk.

C. House Down Payment (5 Years)

  • Instrument: Balanced Advantage Fund (Dynamic Asset Allocation).
  • Reason: 5 years is long enough to ride out small volatility for better returns (10-12%).

3. Case Study: The Car Purchase

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4. Instrument Selection Matrix

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5. Exam Notes: Writing the Answer

Question: "How to plan for Medium-Term financial goals?" (5 Marks)

Key Points:

  1. Definition: Goals between 1-5 years (Car, Wedding).
  2. Risk Profile: Moderate. Cannot afford 100% equity risk.
  3. Strategy: Use Hybrid instruments (Debt + little Equity).
  4. Example: Saving for a Car using an RD.

Summary

  • Horizon: 1 to 5 years.
  • Risk: Calculated.
  • Golden Rule: As you get closer to the goal (last 1 year), shift money from "Growth" to "Safety" to protect it.

Quiz Time! 🎯

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