Portfolio Goals and Time Frame.
The time frame of your goals will determine how the money should be invested.
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.
A short term investor would be more likely to choose a more conservative investment like cash, to ensure that their capital is available in the next 1-3 years when they need to access it.
A long term investor would be more willing to invest in 'growth assets' such as shares, as they do not need to access their capital for at least 5 years, so are less concerned about short term ups and downs. They recognise that the potential returns are much higher in growth investments, and if they are held over the long term the risk is reduced.
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.
Goals
When investing money, many people have a specific goal in mind. If this is the case for you, you need to decide what time frame is attached to that goal - Do you want to use the money in the next year or two? short term, medium term or long term?
Short Term Goals (1-3 Years)
- Travel Holidays
- Furniture
- New Car
Mid Term Goals (3-7 Years)
- House Renovation
- Start a Business
Long Term Goals (7 + Years)
- Retirement
- Higher Education
How do I set my goals?
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.
Your required return generally consists of two components:
- Capital Appreciation
Young investors will likely focus on capital appreciation (e.g., “I need to have total assets of $5 million by the time I retire in 2050″)
- Current Income
While current income may be more important to older investors and retirees (e.g., “I need my portfolio to generate cash of $100,000 per year to cover living expenses” .
Do you want a regular income?
You will need medium term income-producing investments.
Do you want it to achieve capital growth over a long period of time, and are willing to take a long term view?
Required Return
Rather than having a particular investment goal, some people may just be wanting to invest a certain sum of money eg. an inheritance. If you are in this situation, you need to decide what you want from that money. |
