Setting Financial Investment Goals

When you’re starting an investment portfolio, you must first determine what your financial investment goals are. Your primary goal might be to accumulate money that will provide you with an income. If your primary goal is to protect and grow your capital, this is likely your primary investment goal. Those with longer-term time horizons might want to focus on income-generating investments. A secondary goal might be to protect your principal and preserve value. Whatever your primary objective, it’s important to make sure your portfolio is well-diversified so that your financial investment goals are met.

Your financial investment goals will determine how long you need to invest to reach those goals. The longer your time frame, the higher your risk tolerance. For example, you might choose to invest your money in high-yield savings accounts to build your savings. On the other hand, if your goal is to build your income, you may want to invest in exchange-traded funds instead. These investments have a higher risk profile, but you can earn higher returns.

Your financial investment goals are a great way to set and measure your progress towards those goals. Setting specific dates is an excellent way to create a mental framework for achieving your financial goals. Short-term goals might include paying off debt and saving for an emergency fund. Long-term financial goals might include college funding or retirement planning. The Motley Fool advocates investing for the long-term. We avoid day trading and invest only in great companies that are likely to last for years. This method of investing has many benefits and provides tax advantages, too.

Once you have established your short-term and long-term investment goals, it’s time to determine your long-term goals. You should divide your investment goals into three categories: short-term goals are events in the next year or two, while long-term goals are more important, requiring more time. Short-term goals are likely to be achieved in a couple of years, while long-term goals can be accomplished over 30 or 40 years.

Investing for the long-term is a great way to build wealth and diversify your portfolio. While stocks have historically provided generous returns, short-term swings can make the market volatile. A $100 investment in 2008 would have fallen to $43 at the bottom, whereas it could have been used for a summer vacation or college tuition. However, investing in the stock market if you need the money in five years or less is not a good idea.

Long-term goals are often attainable. Often, you can achieve the same goal by putting aside an equal amount each month. A good way to achieve long-term goals is to map out your long-term goals with your long-term investments. By mapping these goals and saving for them early on, you can maximize the return you receive from your savings. You can even use a helpful graph created by Sorted that shows how long-term investments can affect your finances.

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