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Setting Your Investment Goals

If investing is a journey, your investment goals are the destinations you hope to reach with the wealth you build over time. A comfortable retirement is the single most common investment goal, but most investors have more than one goal. It’s important to identify your goals for your financial professional and to arrange them by the time horizon you have set for achieving them, as in the table below:

Short-Term Goals Mid-Term Goals Long-Term Goals
Travel House Down Payment Retirement
Furniture/Appliances House Renovation Higher Education
Wedding Start Business Family Legacy
  Vacation Home Charitable Giving

Other goals

In fact, there are two goals that you should consider before you even start your investment plan. First, reduce or eliminate credit card debt, which generates interest charges that are higher than the investment returns you hope to return in any given year. Second, start an emergency fund and add to it as your income rises and your responsibilities change. A good rule of thumb is to have enough money set aside to cover three months of living expenses. At mid life, when your family responsibilities are at a peak, that figure should rise to cover six months of expenses.

If you are just getting started, it may take time to build an adequate emergency fund. While it is a work in progress, keep your credit record clean and establish enough of a credit limit so that, in an emergency, you could tap your credit card to get by. Keep in mind that this is a temporary fix—and a strategy to consider only in an emergency.

Goals over time

The goals you establish when you begin your investment plan are likely to change. As you realize some short-term goals, they will be replaced by others. When your family expands, with children or grandchildren, you will likely need to revisit your goals. It’s important to share any major changes in your life circumstances with your financial professional. And it’s a good idea to review your list of goals annually, when you meet with your financial professional to review your portfolio.

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