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Reached your financial goal early? Avoid greed for more returns, move to safer investments

If the money goal is less than three years away, redeem from equities and reinvest the amount in debt instruments with lower risks and stable returns

November 18, 2021 / 10:44 AM IST

People like me keep talking about investing ‘more’ to reach our goal targets on time. But what if your investments do a little ‘too well’ and you reach the target corpus years before you actually need the money?

That’s a good problem to have and most people would love to be worried about such things.

An elder friend had a financial goal to save Rs 40 lakh for his daughter’s graduation by 2024. Thanks to the equity rally in the last one year, his portfolio is at Rs 43 lakh with 63 percent equity and 37 percent debt. He has already (over)achieved his target!

As any sane person who understands what havoc a bad sequence of returns can wreak, I asked him to exit/reduce equity. More so because the portfolio is already sufficiently large and there is no mathematical need to take unnecessary risks for high returns.