An investment is a way of acquiring an article or resource to initiate profits and appreciation. An escalation in the value of an article or resource with time is referred to as appreciation. When someone invests in an item or resource, it is not for using it then and there instead it is to be used in the future to generate more wealth. The wealth thus acquired can be used for many purposes as dealing with a dearth of income, repaying loans, or buying another asset.
Why do goals matter?
Goals give you many advantages to achieve success in financial investment as giving clarity about what you need, providing inspiration, and generating a clear and particular plan to be followed. At the time of investing having proper goals set in mind helps people to take the initial step towards something that seems new to them.
It becomes easier for a person to reach a destination with a specific goal. Therefore, you need to decide on your goals and sketch an idea to achieve them. A person may then have a guideline that will help take him to the desired destination with the least risk factors. Having tangible goals makes them easier to achieve. Goals can be either short-term goals like buying bikes, cars, etc, to long-term goals like buying a house, financial investment, retirement, etc. Goals also give purpose to your reserves and investments. They guide you to be attentive and drive you to get closer to it. According to research, people who connect their investments to goals hold on for the long term and achieve good results.
How to set investment goals?
Preparing an investing goal is a crucial move in creating an engaging fiscal plan. It is a primary concern for people of all age groups. The goals can be varied for varied individuals. Some of them can be retirement, crisis funding, family planning, academic planning, major events in life such as marriage or travel, etc. depending on the goals one should be ready for a mid or long-term investment of a minimum of five years.
What makes a good investment goal?
1. The goals should follow the SMART feature:
- Specific– the goals should be clear and specific and not general as to the amount you plan to save and the reason you want to save it.
- Measurable– you should be able to measure the goals for the progress being made as financial goals are not difficult to measure.
- Achievable– the goals set should be within your authority and capacity as setting goals beyond your parlance can bring down your inclination and drag assets from other reachable goals.
- Realistic– they should be obtainable depending upon your present circumstances and match with your larger goals and worth.
- Time-based– a timeline should be set for the progression or fulfillment of the goals as it not only facilitates a sense of haste but also aids in calculating how much can be put aside in one month or week.
2. Risk – think about the risk factor involved as sometimes the market may go up and at other times it may come down. So it is a good notion to consider the situation where you can take a risk and where you cant.
3. Strategy— make a proper investment plan after considering the other factors. Once you have decided on all the factors you need to spot the most suitable investment plan. Usually, it is good, to begin with, low-risk investments. If you are ready to take high risks then you can invest in medium-risk investments. Once you have gained insight through low and medium-risk investments you can opt for higher-risk investments.
4. Make a varied portfolio—- To lower the risk of ups and downs of the market it is always good to make a steady, varied portfolio of investments. Varied factors affect varied investments like the economy, weather, dispute, politics, interest rates, etc. A situation may be positive for one investment and negative for another and vice versa– which means when one rises another
may fall and likewise. So, investing all your finances in one type of venture is a risky policy.
5. Reviewing the investment goals regularly—- it is very important to review your investment goals on regular basis to keep an eye on the ups and downs of the market and also to gauge that they are on the right path to achieving your goals.
Questions to ask when setting your goals?
Whenever one is setting financial goals there are some relevant questions that should be asked to help draft an investment plan making sure one is on the correct roadmap.
- What do plan to do with this money?
One should be very clear about the financial goals and investment and contemplate what one is saving for. For marriage, kids’ education, and retirement. Based on your goals, it is good to divide the money into different sections for different needs.
- When do I expect to need this money?
It depends on the number of years before you think you need the money invested. and it is a very crucial component for planning your investment. The longer the period, the more assertive you can be in handling your portfolio.
- How much risk can I take?
Though some general rules can be applied to most investors, individuals have their risk tolerance level and the investment portfolio should indicate that. There is no guarantee as to how much one can lose if it does not turn out the way you wanted it to be.
- What else this money could be used for?
Always consider the fact that the money you are investing could be used for something else too. And supposedly you are not investing that money at risk. Though investing can be a good way of getting your financial goals early.
- Do I understand what I have invested in?
No matter what is your investment portfolio, you must understand what you have invested in. If it is single stock, you should be aware of the company and its financial conditions. And in the case of mutual funds, comprehend the goals and investment policies.
How to set realistic investing goals
For setting realistic goals here are some steps needed to be followed—
- Realize your goal— this is very crucial in achieving your goals. Realizing what exactly you want to achieve is very important and making it SMART will aid in creating a reachable investment plan.
- Identify your investment strategy– at the time of deciding how you will invest the savings for your goal, appraise your time limit. Short-term goals can be best suited for cash, treasury bills, and money market accounts. They are achievable in less than three years.
For mid-term goals fixed income investments and stocks are good. They can be for about three to ten years.
For long-term goals that are more than ten years away a more assertive approach like investing in stocks, or mutual funds can be thought of.
- Start small— for people who are new to this field and those who are more risk hesitant, it will be good, to begin with, a small investment. Then after comprehending it in a good manner they can progress with a higher level of investment.
- Look for support— it’s always good to look for some support. Seeking advice to achieve your financial goals is needed especially if you are a starter. In today’s world, numerous social media platforms provide guidance and extensive financial advice regarding investment and other topics.
Measuring your progress
After you have invested it is also necessary to measure or gauge your progress to make sure that you are progressing safely on the exact roadmap. Setting a financial goal and making an investment portfolio doesn’t complete your duty. You can easily gauge the progress via many apps available for this purpose. While measuring your progress you should also be ready to make changes to your scheme if it is not achieving the desired result. It may include changing your investment plan or the amount of money invested. Every individual plan to have some investment goals from saving for a rainy day to thinking about a sheltered retirement. If the funds are managed properly, they can offer a long-term investment plan that can aid you in gaining particular goals. The selection of the type of fund, and investment should be in line with the kind of situation you are going to deal with as the investment type will decide the benefits you can await over a period
