Investing is not a category reserved exclusively for the rich, as many may think. On the contrary, all of us, at one stage or another in life, invest our funds for some specific purpose: buying a new house, boat or car; saving for a peaceful retirement; or simply a desire to invest in stocks or some other financial instruments in order to increase our personal wealth.
As you could notice in the previous paragraph, another key term is associated with the term investment, and that is the goal. Investing without a clear goal is like sailing the sea without a compass or map: you have the means to navigate, but you don’t know where your ship is going. What do you want to achieve with the investment? How much do you expect at the end? How much are you willing to set aside in a certain period – monthly, quarterly, or annually? What is your risk appetite? These are just some of the questions you should ask yourself before you even decide to invest.
First step toward financial success
Goals may help you achieve financial success by providing clarity about what you desire, motivating you, and developing a clear and detailed strategy to follow. When it comes to investing, having objectives in place might help people take the first step toward something that is unfamiliar or intimidating to them.
When you invest for your financial future, you are effectively allocating your money to an asset designed to allow your money to increase over time.
If you’re considering investing objectives, you presumably have a solid sense of what you want to gain out of your money. Knowing yourself, your requirements and ambitions, and your risk tolerance are all smart places to start.
However, you must also evaluate elements such as your income, age, and future prospects, all of which will impact your investment objectives.
It’s definitely worth your time to consider what you want from your investments, bearing in mind that time will be an important component. When you invest for your financial future, you are effectively allocating your money to an asset designed to allow your money to increase over time. How you create investing goals is heavily influenced by how fast you need to withdraw your money.
It’s never too late to start
Depending on your age, income, and outlook, you may have one of three types of investment goals. Age can be broken down into three different groups: young and just starting out, middle-aged and building a family, and old and on their own. Often, these categories miss the mark when it comes to the right age. For example, middle-aged people may be looking at investments for the first time, or old people may be forced to stick to a strict budget, giving them the discipline they didn’t have as young adults.
Fortunately, it is never too late to start investing. You may be in your 40s or 50s before you realize that life is going faster than intended, necessitating retirement planning. If you wait this long to create investing goals, fear may dominate your thoughts, but that’s fine if it adds a feeling of urgency to asset management. Whatever your age, income, or viewpoint, all investments begin with the first dollar set aside for that reason. Of course, people who have been investing for decades have a significant edge, since their rising wealth allows them to reap the rewards of their savings practices.
Investment objectives
Investment goals are set up to make money, but there is more to it than that. What are you going to do with this money? If you want to make up for a shortfall in income, save for retirement, pay off other debts, or buy something else, you should be ready for a mid- to long-term commitment, usually at least five years. Investment objectives cover three main money and money management issues:
first
They collide with a life plan that stimulates our mental processes in unanticipated ways.
second
They create responsibility by requiring us to examine progress on a regular basis and to exercise discipline when necessary to keep on course.
third
They provide motivation that has a good influence on our non-financial selves, which can enhance our health and mental attitude.
Once developed, the investment plan requires you to consider compromises and budgets, with the realization that delay or failure will have a direct and immediate impact on your money and lifestyle. This technique encourages long-term thinking and planning, allowing you to forsake a hand-to-mouth attitude and create a priority list for the things in life that are actually important to you.
Use monthly or quarterly statements to analyze progress and recommit to your chosen life plan, making incremental modifications rather than large ones when cash flow improves or deteriorates. Examine your annual results on a regular basis and enjoy watching your money develop without the need for direct action or a Christmas check from a relative. Learn to cope with losing streaks maturely, utilizing the red ink to build patience while reexamining how your decisions may have contributed to those bad results.
Write down and communicate your goals
Dr. Gail Matthews, a researcher at Dominican University of California in San Rafael, concluded in a 2015 study on goal setting that participants aged 23 to 72 who wrote down their goals and sent regular progress reports to friends had a “much higher success rate than those who kept their goals to themselves.” Indeed, more than 70% of those who wrote down and communicated their objectives reported achievement, compared to 35% of those who kept their goals to themselves and never wrote them down.
This is an astounding discovery that is immediately applicable to attaining investing goals and objectives, providing an ideal avenue for persons lacking discipline or determination to overcome those weaknesses in a life-changing fashion. The age variation among participants also demonstrates that it is never too late to reach realistic investing objectives if we are ready to go the additional mile, writing them down in detail and reporting our progress to a helpful third party.
Of all, even the most diligent people might struggle to stay on track financially when life throws a curveball their way. Job loss, divorce, illness, prejudice, or other setbacks might send life on an unexpected path that reduces earnings and savings power. Volatility may also harm financial markets and your investments, as it did in 2007 and 2008, when American investors lost trillions of dollars in retirement accounts.
Despite statistics that show strong long-term equities returns, bear markets and crashes may be unavoidable in the decades between your initial investment and retirement age. Many investors lack the stomach for such unpredictable periods, often disregarding sensible advice and selling long-term assets at rock-bottom prices. It’s easy to persuade ourselves that we’ll be ready for the next catastrophe, but you won’t know for sure until it happens.
Make your goals SMART
The adoption of SMART Goals is the most prevalent rule of thumb that experts advocate for goal-setting. S.M.A.R.T. is a mnemonic acronym that provides criteria for creating goals and objectives to achieve better results, such as in project management, employee performance management, and personal development. George T. Doran coined the word in the November 1981 issue of Management Review. S.M.A.R.T. stands for the following:
Specific
Setting a precise financial goal necessitates determining how much you intend to save and for what purpose.
Measurable
Financial objectives are frequently straightforward to quantify. They each have a monetary value associated to them, and you can easily see how close you are to attaining yours.
Achievable
While it’s fine to establish aspirational objectives, creating goals that aren’t feasible might sap energy and divert resources away from more achievable aims.
Relevant
A smart investing aim should be consistent with your overall goals and beliefs.
Time-Bound
Adding a deadline to your goal not only adds a feeling of urgency, but also allows you to calculate exactly how much you need to save monthly or weekly to meet the deadline.
A lifelong endeavor
Determine your investing goals as early as feasible in life, because waiting too long brings obstacles that may be difficult or impossible to overcome. Planning and execution need a degree of focus and dedication that many people find unsettling, frequently necessitating considerable life adjustments in order to be successful. If the process feels daunting, start small with minimal contributions to the pension account that allow you to watch a little nest egg grow fast.
Raise the contribution as quickly as feasible and proceed to the next phase, which is to set realistic short- and intermediate-term investment goals for the disposable income that is collecting in a checking or savings account. Remember that this is a lifelong endeavor that requires careful preparation at each level, but the result may be enormous, providing a potentially sure road to success.
