Three steps to setting achievable investing goals
The most important thing to investors is reaching their investing goals. Above all else, this is their motivation for choosing investments to buy and sell. For many, these goals provide a roadmap to financial success. Without them, and a well-thought-out plan for meeting goals, investors are unlikely to end up where they want to be financially; in either the short or long-term.
Traditionally, investors have focused on generating the highest possible return or “beating the market,” while staying comfortably within their tolerance risk. A relatively new approach to making investments, is goal-based investing. This emphasizes investing with the objective of reaching specific financial goals – such as buying a house, saving for an education, or building a nest egg for retirement – instead of comparing returns to a traditional benchmark.
Many people work with financial advisers. These professionals can lay out investing options and help investors identify investments that match their exposure to risk. In many cases, working with a financial adviser makes sense, but it is possible to be their own financial adviser – if they are willing to put in the time and effort.
To be successful at goal-setting, you must first set goals that are realistic. To avoid being frustrated by the lack of progress, break down your investment goals into achievable milestones that are meaningful and measurable.
Here are three steps to setting investing goals:
- define measurable and attainable goals
- arrange your goals by the time horizon for achieving them
- attach a dollar figure to each goal
Once you have a list of goals and financial objectives for each, it is easier to plan, budget, and choose the right investments. You may choose to have a single investment goal for a given financial goal,or you may prefer to combine several investments to achieve a balance among stability, income. This goal-based approach to investing has the potential to maximize your overall returns at a level of risk that you are comfortable with, and that suits your financial goals.