Planning a foreign trip or spending your dream vacation can be fun, but it is not always easy to set aside funds to realise your getaway. Strategic investment is the key to making your travel plans stress-free, regardless of whether you're organising a quick break or a long-distance journey.

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Here are various investing options to assist you in increasing your savings while still achieving your financial objectives.

Budgeting your holiday

Before diving into investment options, you must plan a budget, factoring in costs such as travel, exchange rates, time off from work, and the number of people traveling with you. What can really come handy here is research on destination, best time to visit and similar details that can help save a substantive amount. Also, you can plan the number of vacations you want to take in a year and places of visit.

Once you have these parameters in place, you can calculate the expenses you may incur in each trip.

Investment avenues

Long-term goals (over 5 years)

For travel plans that are more than five years away, consider investing in equity mutual funds. These funds have the potential for growth over the long term, helping your money accumulate for those distant adventures.

Here are 5-year and 10-year returns of some of the equity funds:

(Source: Moneycontrol; Note: The above mentioned funds shouldn't be taken as any recommendation)

Medium-term goals (3 to 5 years)

If your vacations are planned in the next 3 to 5 years, experts suggest opting for debt and balanced mutual funds. These options offer a balanced approach with reasonable returns, aligning with the mid-term travel fund needs.

Notably, balanced funds are mutual funds that invest money across asset classes, including a mix of low- to medium-risk stocks and bonds.

Here are 3-year and 5-year returns of some of the balanced advantage funds:

(Source: Moneycontrol; Note: The above mentioned funds shouldn't be taken as any recommendation)

Short-term goals (within 1-2 years)

Short-term vacation plans leave less time for your investments to grow. In such cases, liquid and arbitrage funds are advisable, experts say. These funds offer high liquidity and low risk, ensuring your money is readily available when you need it.

While liquid funds invest in short-term corporate debt, providing low risk and the potential for higher returns compared to regular savings accounts, arbitrage funds are hybrid mutual funds that generate returns by using the strategy of simultaneously buying and selling the same underlying security or its derivatives in different market segments to make risk free profits.

Experts also recommend investing in ultra low duration debt funds. These funds lend to companies for a period of 3 to 6 months. They are also considered low-risk funds owing to their low lending duration.

(Edited by : Ajay Vaishnav)

First Published:Sept 27, 2023 8:32 AM IST