How to set a realistic investment goals? – that will be the topic of today’s article.
If you are looking to invest as an expat or high-net-worth individual, which is what I specialize in, you can email me (advice@adamfayed.com) or WhatsApp (+44-7393-450-837).
Table of Contents
Introduction
Over the past few years, everyone around has come to know about the importance of investing.
Investing makes your money work for you. It also helps you in getting rid of your financial difficulties.
If done right, investing can help you reach all your financial goals. It may even aid in making you a millionaire and pursuing your expensive dreams.
According to estimates that more than 90% of the world’s millionaires are investors.
Don’t get confused between investments and savings. They are different. The money left from your earnings after your expenses are savings.
Usually, savings get deposited in bank accounts such as savings accounts.
Anyhow, the money put into some other asset class for creating more wealth is an investment.
Most people have a misconception that saving money would make them wealthier. Well, that’s not true. Letting your money sit ideally will never help you achieve your financial goals.
Furthermore, it might even depreciate because of the inflation we experience. Nowadays, inflation is going off the roof at a faster pace.
Investing will help you make more money and that’s true. Anyhow, not investing in a proper way might make lose your hard-earned money.
That’s right! Most investors these days experience losses because of the following things:
— Lack of proper knowledge
— Being unaware of fees and taxes involved
— Setting unrealistic investment goals
— Panic selling
Anyone can learn the art of investing and it is not impossible. It is hard though, or at least it is for some people.
Some of you may not have enough time to take care of your investment needs on your own.
For instance, you may be a General Surgeon and make a lot of money. You may have all the necessary skills and knowledge related to investments.
Yet, you may not have enough time at hand to deal with your investing needs.
If so, it is wise to seek the services of an expert financial professional. The specific financial professional will handle your investments on your behalf.
As said before, there are various things that affect the investing ability of a person.
Among them, setting investment goals is a crucial aspect. Setting investment goals is one thing. But setting realistic investment goals is another aspect.
Some people, while investing, get into it with unrealistic expectations. Expecting returns around 10% is okay but expecting something around 30% – 50% may be out of the line.
We are not saying that you shouldn’t aim high. Instead, we say that you must be more practical keeping your financial situation in mind.
That is why we are here to assist you in creating your investment goals. Let us begin.
Importance of Goals
Like a wise man once said, goals are the road maps that guide a person and show what’s possible.
Setting a goal is the first step to achieving financial freedom or even becoming rich. Of course, becoming rich is the goal of 99.9% of people all over the world.
Setting realistic and achievable goals helps you stay focused and reach the target. There is an excellent example to depict the importance of goals.
In the year 1979, 3% of the students had written down concise goals. In the same program, 13% had goals but they haven’t written them down on paper. The remaining 84% did not have any goals.
After 10 years, in 1989, 13% of people were earning twice as much as 84%. Additionally, the 3% who had written goals were earning 10 times. Especially compared to the remaining two groups combined.
Here, the concept of writing down goals does not mean writing one’s goals on a piece of paper. Instead, it means to have determined goals and a plan on how to achieve them.
The goal should be in your mind in such a way that you can even remember it in your sleep.
In the financial realm, goals play a key role in offering clarity and motivation. Adding to that, they also assist in devising a plan that will help you achieve financial success.
Most investors, especially young ones, find it hard to start the process of investing. They find the process to be so hard that they lose interest within a few months after starting.
For such individuals, setting a goal can be a tremendous help. As you now know the importance of setting a goal, the next step is to define your goal.
Define a Goal
What is your goal? Is buying a Lamborghini or a Bugatti your goal?
Is your goal all about having a massive bungalow and a lot of cars, planes, yachts, and other expensive things?
Sorry to burst your bubble but these sorts of things aren’t considered to be goals. They are desires. There is a difference between such desires and goals, and by which, I mean “Realistic Goals”.
Desires are achievable. For achieving them, you must have:
— Determination
— Consistency
— Hard Working Nature
— Ability to deal with failure
— Focus
— Courage
— And all the other success-related personality traits that you’ve ever heard of.
Even after that, there is no guarantee that you get what you want (regarding your desires).
On the other hand, a goal is something that can be accomplished by you. If you devise a perfect plan and stick to it, a goal is doable.
Wanting to lead a luxurious lifestyle makes you fall into the category of having a desire. The goals look something like those given below:
a. Planning for retirement
b. Rainy day funds
c. Planning for a wedding and raising a family
d. Buying a house
e. Pursuing another career
f. Starting your own business
These sorts of things are achievable with the appropriate amount of time and effort.
Let us discuss some of the goals briefly so that you have a brief understanding of what goals actually mean.
Retirement
One of the major goals among most people these days is retirement. “Financial Independence, Retire Early (FIRE)” is getting popular nowadays.
This FIRE movement is all about investing successfully and retiring at an early age. This applies to entrepreneurs as well as employed people.
Saving enough money and investing it appropriately can help you attain financial freedom. Setting your investment goals assists in achieving financial freedom at a young age.
I’ve written a book on this topic, and this book will help you with the FIRE movement. You can access the book by clicking on the link that’s provided below.
Rainy day funds
Besides retirement, you may need a significant amount of money. As an emergency reserve. With the unpredictable situations increasing every day, one should have a nest egg.
A 40-year person must have at least twice his/her annual income as a nest egg. This is according to the savings guidelines provided by Fidelity.
If it isn’t possible, you must at least have six to 12 months’ worth of income as a reserve.
There aren’t some money-related numbers that are said randomly. Most professional and famous analysts around the world agree with this data.
Such a nest egg will come in handy during unemployment, emergency expenses, etc.
Planning for a wedding and raising a family
If you are a single person, then you might have thought of starting a family. Well, starting a family is an aspect that requires a lot of money.
A wedding is a major event in a person’s life, and therefore, treat it that way.
A wedding involves a lot of activities such as a wedding photoshoot, honeymoon, and so on.
Furthermore, you may even be planning a bachelor party or a bachelorette party. Consider the expenses for that as well.
If you plan for a destination wedding, then the budget will hit the roof for sure.
So, know your requirements for your wedding and estimate how much it’ll cost.
Well, this is just the beginning my beloved ladies and gentlemen. You will require money for the wedding like I just said.
But you’ll require more money after the wedding, like for instance, when you have kids. Think of kids’ education and providing a nice home for them.
Don’t forget the shopping, movies, and other things that you would love to do with your family.
These aspects alone would set you back by thousands of dollars. Set an investment goal that’ll make enough money to help you take care of these things.
Buying a house
Earlier, we said the difference between desire and a goal. Well, it would definitely be a desire if you want to have a gigantic estate or a massive bungalow.
Keeping that aside, wishing to provide a home for your family is definitely a reasonable goal. In fact, it is a thing that most responsible people (with a family) do.
There are certain investment plans particularly designed for saving for a home. Even if there aren’t any in your country, you can just stick to a traditional investment strategy.
Buying a home can be a very troublesome process that cannot be taken lightly. It is a dream for everyone to be able to afford their own home
Pursuing another career
Sometimes the career your career may not be satisfactory for you. In such circumstances, you must be prepared to search for another career.
At such times you may need to learn a course, move somewhere else or be out of employment.
All these things need money. Your rainy day funds might help, yet it is better to have some money set aside for these purposes. Hence, investments save the day again.
Start your own business
Starting a business has become popular among the youth these days. Regardless of age, starting your own business will give you a lot of freedom.
As you may already know, creating a business from scratch will require a lot of money.
Banks or other institutions provide loans for these purposes. Yet, you will need to spend some money out of your pocket as well.
Moreover, it would be great if you are able to start a business without financial help.
Investing in a proper way allows you to get the financial help you need for starting a business.
From your investments alone, you should make enough money to overlook these aspects. This applies to all the aspects we have discussed above.
In this way, while setting your investment goals, start by defining your goals.
SMART Goals
We’ve come up with a few factors which determine whether your goal is really a goal or a desire. Given below are those factors.
First of all, you should be specific about your goal. This means your goals should be very clear instead of wanting something in general.
So, the first step of setting an investment goal is to be “Specific”.
You must be able to measure your goals so that you track your progress. So, the second important step for a goal is to make it “Measurable”.
As we said before, a goal gets considered a desire unless it is achievable. So, make sure that your goal is “Achievable” if you do everything in the right way.
The following step is to make sure that the goals comply with your current situation. they should be “Realistic”.
Finally, make sure you have enough time at hand to accomplish your investment goals. Have goals with sufficient “Time”.
So, your investment goals must be SMART (Specific, Measurable, Achievable, Realistic, and Time-based).
These SMART goals aren’t something that I’ve invented. Instead, many renowned websites state the same principles while investing.
Set a Strategy
While setting an investment strategy, you must pay attention to certain aspects.
Some people have a higher risk tolerance and some may not. Some might prefer aggressive investing whereas some may go ahead with steady returns.
Therefore, you must know about the type of investment strategy that suits you. By suiting you, we mean that it should cope with your goals and current situation.
There are certain factors that determine the right investment strategy for your goals.
Such factors include investment timeframe, risk tolerance, financial situation, etc.
There are some aspects to be considered while setting an investment strategy. Let’s have a look at some important aspects influencing an investment strategy.
Growth
Young people generally have a higher risk tolerance, and they can focus on growth.
During these unpredictable times, it is very essential to focus on a growth strategy. This will be very helpful for dealing with inflation as well.
Growth can be considered a necessary part of your investment goal. However, it is apt for investors who are young.
The more the possibility for higher returns, the more the risk will be for those investments.
What kind of people should focus on growth while investing? Well, a growth perspective can be ideal if you are:
— Young
— Having a higher risk tolerance
— Financially stable
— Aiming towards an aggressive portfolio creation
People who are nearing retirement must try to protect their money instead of taking a risk.
Wealth Preservation
Investors who are nearing their retirement age must pay attention to this option. Wealth preservation primarily focuses on lowering the risk involved with investments.
Not just the people who nearing retirement, but others as well. For example, if you do not have enough net worth, then you must build wealth first.
In such circumstances, you must go ahead with a conservative strategy. If you still go ahead with a growth perspective, then it may lead to financial difficulties.
Even though the returns may not be significant, the risk involved will be quite low.
There are various retirement savings plans that allow you to grow your wealth. This allows you to save more money, which can be used for other goals.
Investing in stocks that offer higher dividends is also a conservative strategy. However, this is suitable for those with slightly higher risk tolerance.
Alternatively, there are certain low-risk investments such as bonds. Such investment vehicles follow the preservation strategy to help in building growth.
Yet, you may not get enough returns by investing in these asset classes.
Maintaining Cash Flow
Investing is a process that should lead to improvement in your financial situation.
Earnings should be evenly distributed. First your expenses, and then, paying off debt. Only then you should go ahead with savings or investments.
Making the right investment choices can also lead to a healthy cash flow. But for that, you should have the right amount of earnings.
If you don’t earn enough, you can always have a side gig that’ll earn you some extra money. Otherwise, you can even try to change your line of career while seeking something that’ll pay you more.
When the cash flow is adequate enough, you’ll have enough cash at hand for your endeavours. Especially, your investments.
Lifestyle
There is nothing wrong with improving your lifestyle compared to what it is now.
For example, imagine that you have a smartphone with very few features. Then, it is completely reasonable to wish for an upgrade. It is even okay if you want an iPhone or something.
But you must make some adjustments to your current lifestyle for that. For example, cut down on Starbucks for some time and utilize public transport.
This might seem unreasonable but you might want to sacrifice a few things for the lifestyle you want. This depends on how bad you want a change in your lifestyle.
Plan
Remember the 3% of students who wrote down their plans and excelled in their lives? Yes! To achieve excellence in anything you must be determined and devise a plan.
Not just any plan, but instead, a plan that’ll work for sure. Write down your goals. You should be very specific about the plan as it is essential for achieving your goals.
Remember that a goal without a plan would just remain a dream. This plan should also outline the strategy and how it will be helpful.
Some goals are for the longer term (retirement), whereas some might be for the short term (like buying an iPhone).
Know your priorities and invest accordingly for reaching your goals. As always, I would always recommend going for long-term investments. But what can I say?
Ultimately, you have to know what’s really important in terms of investments. And what type of investment strategy you are willing to go for.
Regularly monitor your progress. Keep a track of how much time or how many milestones are left before achieving your goal. This will result in an increase in your motivation levels as well.
Don’t be disappointed if you feel like you are falling back on the time left to reach your goal. Sometimes, Life Happens. Don’t be hard on yourself.
While creating this plan, determine the money required to put into your investments. This is the main reason that people fall back on time regarding their goals.
Timeframe
Your investment strategy must comply with your financial needs/objectives. Depending on your goals, you can set an ideal timeframe.
There can be three types of investment timeframes. They are short-term, intermediate-term, and long-term investment goals.
These also depend on your age and other relevant factors. I want to say a few words about the timeframe you want to set.
Sometimes, investments made for short-term goals may not offer the desired results.
When making an investment for the short-term most people go for risky investment vehicles.
Such investments include day trading, CFD trading, forex markets, etc.
Even though these offer higher returns, the chances are likely for you to lose the invested money.
Like a quote in the movie Fight Club, “We buy things we don’t need, with money we don’t have, to impress the people we don’t like”.
Don’t put yourself in a rat race just because of your desires. Always prioritize your goals and opt for intermediate-term or long-term investment strategies.
One more thing. Don’t dedicate yourself to investments and miss out on all other things in life.
The ideal way is to earn, save, and invest, and all this should be done while enjoying your life.
Start Low and Seek Assistance
If you are a complete beginner to the process of investing, then aim to start with smaller amounts.
This allows you to be successful and feel that your investment goals are more achievable.
This means you should stay away from riskier investments. Especially during the start of your investment journey.
Finding the right type of investment advice has been a tough process for ages.
Yet, it would always be helpful to seek the assistance of a financial professional. An experienced financial advisor (like us) will guide you in succeeding in your financial endeavours.
Bottom Line
Getting into investing at an early age is always beneficial compared to investing in later stages of life.
Planning and execution of an investment strategy require discipline. This might feel like it’s impossible for some people out there. By starting small you can get used to it and succeed after some time.
The main concept of this article is to shed some light on setting investment goals.
Do you fall under the category where you don’t have enough time to take care of your investments?
Are you a beginner in the realm of investing and want to leave the matter to a pro?
Otherwise, do you want to enjoy your life to the fullest while being able to put your money to work?
Well, we are always here to help you with your investment needs. We cater to the investment needs of wealthy people, expats, and individuals.
Depending on your financial situation and investment objectives, we can help you achieve your financial goals successfully.
To acquire the best-in-class financial services offered by us, you can click here.
Having said that, we strongly hope that the information in this article was helpful for you.
Pained by financial indecision? Want to invest with Adam?
Adam is an internationally recognised author on financial matters, with over 760.2 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.
