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Investment Goals: How & where to start?

Know where your investment is heading to get the best out of it.

In many investment tips for beginners, there would always be those that tell you to set your investment goals first. Well, okay – you know that you need to set your goals now. But how does it really work? Do you just put a Lamborghini as a goal and that’s that?

 

Setting investment goals is an important part of achieving financial success. It allows you to make informed decisions on where and how to invest your money and helps you stay focused on reaching your financial dreams in the future. 

 

When setting investment goals, it is important to consider factors such as the amount of risk you are comfortable with taking, your timeline for reaching the goals, and any other relevant factors that may impact your ability to reach them. By setting achievable investment goals, you can increase your chances of reaching a successful financial future.

The Two Horizons of Investment Goals

Well, as much as a lot of people wouldn’t pass on the chance of owning a Lamborghini from their investment, many are aware of the reality of investment. It’s  a game of risk. Being realistic isn’t just a good thing to do, it’s the way to do things if you’re planning to keep your head in the game for long. 

 

There are generally two horizons in which you can look at your investment goals: time-based and concern-based.

1. Time-based

Under the time-based way of looking at investment goals, your goals can be divided into short-term or long-term gains. 

 

Short-term gain

 

Some investors want to get short-term gains from their investments, and many are with good reasons. Some need to pay for their education loans, some want to go for a Euro trip, and some aim to buy whatever it is that they want to buy.

 

If you are someone who seeks short-term gain, you’ll have to know which assets can give you the ability to make money in a short period of time. 

 

Usually, if you are seeking short-term gains, you’ll have to dwell with riskier assets like volatile stocks or high-yield bonds that can give you quick money.

 

However, if you are okay with the quick money that isn’t too grandiose in amount, you can look to put your money in short-term low-risk assets like (short-term) government bonds, Treasury bills (T-bills), certificate of deposits (CDs), money market accounts, and high-yield savings accounts.

 

Long-term gain

 

Some seek to reap the fruits of their investments within a longer period, perhaps as a safety net or a comfortable resting bed for their retirements. When speaking of long-term investment, it usually involves investments that would go beyond three years.

 

Among the assets that are usually traded to facilitate long-term investment are stocks, real estate, or even alternative investments like paintings and collectors’ items.

2. Concern-based

If your goal isn’t time-centred, but rather on what is it that you aim to get from your investment, then you can look to craft your goals based on this approach.

Safety

Some put safety as their investment goal. Safety here refers to the low risk which surrounds the assets they are investing in. Simply put, these are the ones who put “not losing my hard-earned da*n money” as their main concern for investments.

 

If you’re not keen on taking risks over your hard-earned money, you can look to adopt this approach in your investments. People who seek peace of mind can look to invest in low-risk assets like government-issued bonds, AAA-rated bonds*, or even gold (for the long term).

 

 

*Corporate bonds are rated according to their risk of default. AAA is the highest, followed by AA, down to C being the riskiest. 

 

 

However, do note that when you’re playing safe, you’re more likely to earn less. You know the rule: the bigger the stake, the bigger the win. 

 


Another thing that you’d want to keep your heads up on is inflation risk. Well, let’s put it like this, your investment is growing at a slow pace, the safer you play, the slower it would likely get. Meanwhile, inflation is moving at a supercharged-godspeed-5000 pace. 

 


If your situation is per above, by the time you want to cash out on your investments, you’re likely to lose the real value of your money rather than gain it

Income

Some put their goal of investment as to have sources of supplementary incomes, or even primary incomes to get them through the month/year. How investments can generate income via payments to investors, especially for bonds that would entail interest repayments.

 

If the risk is not much of a concern to you anymore, you can look to go for riskier bonds that are below AAA rating, like the AA, A, or BBB-rated bonds. Anything below that is shooting from the hips. Again, win big-lose big. 

 

You can always go for safer assets, but if income is your concern, you may be looking at a small income in lieu of the small risk that you’re willing to take. 

Growth

Some don’t focus on safety, nor do they focus on generating income, but they’d rather have their assets growing in value. Well, for this one we are usually talking about stocks (although not necessarily).

 

If you’re the kind to focus on your value growth, as you move forward, you might want to consider stocks like the blue-chip stocks, and growth stocks or you can even go for exchange-traded funds (ETFs), especially those that seek to tail indices with good growth.

Here are a few heads up

Play safe or risk it all? look for growth or income? Grab the cash here and now or wait for it to boom? Well, two things: that is up to you, and you don’t have to choose either one.

 

Of course, you can’t have the best of all worlds. You can always mix and match these different paths, but each will have its weight in the equilibrium. If you add more safety, then perhaps you’ll look at lesser growth, and vice-versa. 

 

The key is to find the mix-and-match that suits your risk tolerance, your financial planning, and your financial capabilities. 

 

Say, you aim to pay for a Urus Lamborghini’s deposit after 1 year of investing, and you only earn $2,500 a month. Save $1,000 a month, and you’ll still be $11,000 short in a year. There’s no other way but to take these risks and to take it big, but you’ll lose big too if you screw up. 

 

That brings us to our most important advice, know when to change your goal. Sometimes going can get tough, don’t quit. When it gets impossible, don’t quit, but look for a different path. 

 

We know it’s hard to navigate the fine line between hard and impossible, but our main advice is for you to throw away your emotions, look for a ledger, and start lining out your financial details. 

What’s next?

All the blabbers on how to start identifying your goals, but quite too little on what you should do practically. Well, here’s how:

 

  • Start by identifying your objectives. What are you trying to achieve with your investments? Are you looking to build wealth over the long term, or do you need the money for something specific in the near future? Knowing your objectives will help you determine the right investment strategy for you.
  • Determine your time horizon. How long do you have to invest? If you’re saving for retirement, you have a long time horizon, which means you can afford to take on more risk. But if you’re saving for a down payment on a house in the next few years, you’ll want to be more conservative.
  • Assess your risk tolerance. How comfortable are you with the idea of losing money in the short term? Some people are comfortable with a lot of volatility, while others prefer more stable investments. Knowing your risk tolerance will help you choose investments that align with your goals and comfort level.
  • Set specific, measurable goals. Instead of saying, “I want to make a lot of money,” set specific goals like “I want to save $50,000 for a down payment on a house in the next five years.” Having a clear, measurable goal will make it easier to track your progress and make adjustments as needed.
  • Diversify your portfolio. Diversification is key to minimizing risk and maximizing returns. Instead of putting all your money in one stock or one type of investment, spread it out among different assets to reduce your exposure to any one particular risk.
  • Finally, review your investment portfolio regularly and make adjustments as necessary. Keep in mind that your goals and risk tolerance may change over time, so it’s important to regularly re-evaluate your investment strategy and make adjustments as needed.

Bottom line

Remember that setting investment goals is just the first step. The key is to stay focused on your goals and make sure your investments align with them. With a clear plan in place, you’ll be well on your way to achieving your financial objectives.

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None of the material above or on our website is to be construed as a solicitation, recommendation or offer to buy or sell any security, financial product or instrument. Investors should carefully consider if the security and/or product is suitable for them in view of their entire investment portfolio. All investing involves risks, including the possible loss of money invested, and past performance does not guarantee future performance.

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