How to Set Realistic Investment Goals With the Help of an Advisor

posted by Chris Valentine

When investing, a dose of realism is a good thing. Investing in goals that are out of alignment with your real-world needs can cause frustration and setbacks.

Creating financial goals that are specific, measurable and within an achievable time frame is essential for long-term success. Investment goals are generally categorized as short-term, mid-term or long-term.

Understand Your Risk Profile

For investors to be successful, they must have realistic expectations and create a plan that will work for them. Otherwise, they may waste time, money and resources chasing unrealistic ambitions that could never come to fruition.

Developing an accurate sense of risk tolerance is essential to investment planning, yet it can be challenging to gauge. People often associate risk with opportunity and excitement, but it is also about tolerating losses and holding on during market downturns.

Your risk profile will change over your lifetime, influenced by several factors, including salary and savings. For example, young adults with little disposable income and few assets can have a moderate risk profile, while those close to retirement and have substantial savings tend to have a conservative profile. Moreover, unexpected life events like layoffs and medical bills can significantly affect your financial situation and the amount of risk you can afford.

Determine Your Time Frame

The time investment goals take to reach fruition is an important consideration. Ultimately, successful investing results in a long-term return that can compound significantly. The time you can wait for your investments to reach their intended outcome will determine how much risk you can take and the type of investments and savings products best suited for you.

It’s helpful to divide your financial goals into different categories based on their timelines, such as short-term, mid-term and long-term. Retirement is often considered a long-term goal while saving for a child’s college education might be considered a mid-term objective. Each category has a different impact on the types of investments you may consider, and each requires a different approach to wealth management. Having clear and measurable goals will also help you stay on track to meet them. This will allow you to evaluate your progress and make adjustments as needed.

Create a Strategy

Once you understand your risk tolerance and time horizon, creating an investment strategy designed around reaching your goals is possible. Using your financial advisor’s expertise, you can develop asset allocation strategies to meet your specific needs. For example, if you are trying to fund your child’s college education, the amount of money you need and the number of years before graduation will determine the type of investments you should make.

Unfortunately, many investors don’t take a realistic approach to investing. They become more interested in “get rich quick” impulses like buying meme stocks and cryptocurrencies, even though research from behavioral economics tells us that acting on these types of investments rarely ends well. A matching tool can connect you with a local financial advisor who can help you set realistic investment goals and create an appropriate strategy. Reviewing your goals periodically is important to ensure they align with your plans.

Monitor Your Progress

Whether investing to fund retirement, pay for college or amass an emergency stash, creating and sticking with an investment plan is important. Having clear, measurable and realistic objectives is essential to creating a plan that will likely lead to successful outcomes.

It’s also helpful to segment your goals into short-, medium- and long-term categories, aligning them with your natural life stages. For example, saving for a vacation or the down payment on a home can be considered short-term; amassing money to invest in your career is usually a mid-term goal, and funding retirement typically falls into the long-term category (with stiff penalties for prematurely accessing those assets).

In addition to setting goals based on time frames, reviewing them to ensure they still fit your plans periodically is wise. This can be a great opportunity to consider the benefits of rebalancing your investments, taking advantage of new opportunities or adjusting your strategy to accommodate changing priorities.


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