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How to set investment goals

How to set investment goals

Defining the financial goals you have can help you plan, budget and choose which investments might be right for you.

Your goals could be around enhancing your current lifestyle, planning for your family or your own retirement.

Goals can be simple and short term or more complex with longer term objectives.

A good starting point is to create a list of your goals and a realistic timeframe in which they can be achieved. For example:

  • New car – one year
  • House renovation – five years
  • Retirement – 25 years

Understanding how long you have to achieve each goal will help you understand the level of risk you need to consider.

If you are investing for a short-term goal, for instance, the highs and lows of riskier investments, such as shares, may not be right for you. But if your goal is medium or long-term, you may have time to accept a higher level of investment risk.

Risk tolerance

Your risk tolerance is the level of risk you are willing to accept. For example, how comfortable would you be with the prospect of coping should you lose a large part of your investment, and to what extent would this compromise your ability to achieve your goals?

If you have set long-term goals, it’s also important to make sure your goals will not have a short-term impact on your lifestyle that you are uncomfortable with.

Budget to get on track

When you have created your goals and timeframes, it’s a good idea to define your budget, being realistic about what you can afford to put aside for your investments.

To help you stick to your budget, look at how well you are managing your money and whether you may need to put any additional strategies into place, such as a direct debit from your transaction account into a dedicated savings or investment account.

Here’s a checklist to get you started:

  • Set goals
  • Decide on timeframes
  • Define your budget
  • Implement a strategy to manage your income and expenses
  • Research the risks

This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice.