4 Reasons for Goal-Focused Investing
The fact is, investing isn’t just about making your money work for you. It’s about making your money work for you for a particular purpose. In other words, you need a goal. Here are four specific reasons why a goal-focused approach to investing is important. Because It Puts You In Control When you first start investing, it’s easy to get overwhelmed. You may feel like you have little control over what happens to your money. No matter how careful you are, you could lose what you invest. When you think of it that way, it’s easy to question whether investing makes sense at all. But if you take a goal-focused approach to investing, you’re not just watching the value of your portfolio rise and fall based on the whims of the market. You (along with your advisor) are making specific decisions designed to help you reach specific goals. If something’s not working, you change the plan. Because It Will Be Easier to Save Saving money just to save money is no fun for most people. After all, why invest a portion of your paycheck for the future when you could have something you really want today? Having concrete goals can turn saving from an abstract concept to a concrete step to achieve a certain aim — like being able to retire one day, take a trip around the world, or send your grandchildren to college. And studies have shown that the better you are at setting goals, the more you’re likely to save. You might even do better by focusing on the intermediate steps on the way to your larger goal, like having a certain amount of money in your retirement accounts by age 45. Because You’ll Be Less Focused on How Others Are Doing A little competition is healthy, but when it comes to investing, it can get risky. If your father-in-law is bragging about the great return he got on his investments, it can be tempting to drop your plan and copy his moves. It’s especially tempting if your only goal with investing is to make more money. But if you’re investing toward a goal with a clear plan, you’ll be able to congratulate your relative on his success while staying focused on your needs. After all, if you were flying from New York to London, you probably wouldn’t suddenly take a side trip to visit Buenos Aires. That’s exactly what you’re doing if you get distracted by other people’s investing moves. Because It Will Help You Weather the Ups and Downs of the Market The market goes up and the market goes down. Sometimes, it goes way, way up or way, way down. Just like a roller coaster, these peaks and dips can make your stomach do flip flops, especially when your life savings is on the line. But having a goal-focused approach can help you cope with those ups and downs. If you know that you won’t need your money for another 30 years, you can handle some volatility today. But if you’re going to need your money in the next couple of years, you can select less volatile investments, so the day-to-day movements of the market won’t stress you out. Knowing your specific goals will help you choose the right investments.
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This newsletter was prepared by Integrated Concepts Group, Inc. The opinions expressed in this newsletter are for general information only and are not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. The views expressed are those of the author and may not necessarily reflect those held by PlanMember Securities Corporation. Material presented is believed to be from a reliable sources and PSEC makes no representation as to it accuracy or completeness.