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Can You Fund Your Dream Vacation by Investing in Mutual Funds?​

Vacation planning seems like a thing of the past in the challenging times of today. The hit taken by the tourism industry worldwide is shown in the numbers. According to Forbes, in the first 10 months of 2020 itself, the industry had seen a revenue decline of $935 billion globally. But with countries opening back up, both the industry and travellers expect tourism to make a comeback starting 2022. If you’re one of these hopeful travellers, then the rest of the article can be very useful to you to plan the finances for your upcoming trip.

Travelling can be an expensive proposition, especially if your dream destination is a big city or exotic locale. It may take years to arrange the money to finance such a trip. In fact, you may need to consider taking money out of some earmarked investments to fulfil your dream vacation desire. Because of this, some people tend to back out from such plans. But you don’t need to because you have mutual fund schemes that can help you arrange finances to plan your next trip.

Steps to use mutual funds to fund your vacation

Using mutual funds to create wealth or a retirement corpus is understandable, but for vacation planning? Though it may seem odd, the thought is not as far-fetched as you may initially think. At the end of the day, using mutual fund schemes to fund your vacation is no different from planning to buy a motorcycle. You have a budget and a time horizon to achieve both. So, arranging money for your vacation is the same as planning for any goal where you need the help of financial markets.

The first step in planning your vacation via mutual fund schemes is to know the budget. That will depend on the place, the duration of stay, the mode of travel and the activities you plan to do there. If it is an overseas vacation, you’ll need to consider visa and associated processing fees as well. This step will help you assess the amount you’ll need to set aside from your end for the trip.

The second step to know is the time horizon, i.e., when would you want to travel. This is important because it will play a key role in determining the products which will help you fund your trip.

The third step is to select the appropriate mutual funds given the first two steps. You can do the research yourself or engage an advisor for the same.

The fourth step is to keep track of your investment and, given your time horizon of investment, rebalance if necessary.

Make use of the diverse options available

If your trip is some time away, maybe up to a decade, then you may use funds from the equity category. Large-cap funds, multi-cap funds, and Flexi-cap funds, etc may be all well suited to help you create the required corpus. A long time horizon allows you the ability to handle a short-term downturn in equity markets.

If you have 3 to 4 years for your trip, you may use balanced advantage funds or funds from the moderate to aggressive hybrid funds category. Meanwhile, funds from the conservative hybrid fund category and short-term mutual funds may be useful if your trip is within three years.

Remember to use facilities like systematic investment plans (SIPs) and systematic transfer plans (STPs) to make your investment process smoother. By using mutual funds, you can plan travel to even those destinations that you perceived to be out of your reach because of the expenses involved. So, go ahead and plan that trip

The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. The sponsor, the Investment Manager, the Trustee or any of their directors, employees, affiliates or representatives (“entities & their affiliates”) do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Entities & their affiliates including persons involved in the preparation or issuance of this material shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of lost profits arising from the information contained in this material. Recipient alone shall be fully responsible for any decision taken on the basis of this document.

Mutual Fund Investments are subject to market risks, read all the scheme related documents carefully.


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