What is a goal. A goal, basically, is something you desire or want to accomplish-
Investment goal is setting an objective that is
reasonable, able to be met, within a time frame.
First, start by defining objectives for this goal.
It could be a college fund for the kids, retirement
for you. There may be a house that you would like within the next
Whatever the reason you have identified as your goal for investing, you then need to figure out
how much you have to invest.
You may have multiple goals. I.e.., short term college, and long term
From your budget how much can you contribute each month or quarter.
have to have a budget or you'll be flying blind. You wouldn't get on a
commercial airliner with a blind pilot. So make a budget, it's that
This is where a strategy comes in. Build a plan, a strategy of the
different goals you want to meet and a timeline of when you want these goals
to be reached.
Determine how this will fit in with your budget.
Once you have that, you can determine what kind of risk there is for each
of the goals.
Example. If you are in your mid-thirties and you want to retire when you are
60, then you have about 25 years for this goal.
So that kind of risk is low if you have 20 to 30 years for your investment
goal to be reached.
You could possibly afford a very risky fund or volatile stocks that
both may go from one extreme to the other but you may not care as you don't
or will not need the goal reached for such a long period of time.
Example. Let's say you want to buy a house in less than 5 years. You may
also have equity in the current house that can also be used.
Here since you have less than 5 years to meet your goal, you probably
would approach this with very low risk.
The stock market goes through cycles, as does the economy, housing, and
energy. These cycles can take years to evolve, so with less than a 5 year
timeframe, it would possibly be too risky to invest in stocks or funds.
The last thing you want to happen is for that $10,000
investment to turn into
$6,000 because the market is down and you can't wait for the market to
Example. Let say your vacation- life time vacation in Europe is coming
up next year. You certainly don't want to have any risk with this, so a money
market, tax exempt may be what you would use to fill this goal.
These three examples are intended to give some extremes so that what
you have learned can be retained by example, especially if you can relate to
these fairly common goals.
Now that you have a goal, you may be ready to find an investment.