Investment Goals: A Comprehensive Step-By-Step Guide
March 4, 2024
Why Set Investment Goals?
Navigating your finances for the first time can be daunting.
But if you are serious about achieving financial security, setting investment goals is a good place to start.
Knowing your goals can help guide your investment plans.
Think of it as a roadmap you can refer to when making decisions with your hard-earned money.
Perhaps you need to grow your wealth to afford your children's education. Or purchase your first HDB flat.
When you know what you need your money for, you won't risk getting carried away, investing in the next big stock without a solid strategy, or simply letting your money sit idle in the bank.
Instead, your investments start becoming a strategic tool that works for you.
In this article, we'll cover a few aspects to consider when setting your investment goals and how to move forward from there.
How to Set Your Investment Goals?
For starters, think of new experiences and life chapters you look forward to achieving.
Your investment goals could be anything that requires an expenditure, such as further studying, starting a family, going on an annual vacation, or taking a year off to pursue a business idea.
One of the most common investment goals is securing the peace of mind provided by a retirement fund. It’s a milestone that requires a significant financial cushion if we desire a lifestyle without financial worries one day.
To make smart investment decisions, you will benefit from being clear on your goals.
Let's take a look at how you can do that.
Timeline
Categorise your goals. Typically, your goals will fall within one of these three timeframes:
Long-term goals (10+ years from now) – e.g. Retirement fund, a child's college fund.
Mid-term goals (5+ years from now) – e.g. Buying a car, starting a family
Short-term goals (1+ years from now) – e.g. A vacation, down payment for a HDB flat
According to your goal’s proximity, you can start determining the level of risk you are comfortable taking.
The longer timeframe you have, the more opportunities your money can grow in the market. And the more you can take advantage of compound returns.
Risk Tolerance
Assess your risk tolerance carefully.
Factor in your current commitments and timelines.
While young investors might be able to stomach more risks, having a shorter timeline can demand a more stable approach.
For example, if your short-term goal is to tie the knot in the next two years, going with a lower-risk, liquid investment such as short-term bonds, fixed deposit or a savings account might be a better option.
On the other hand, higher-stakes equity investments may potentially yield higher returns over the long term, making them a suitable option for goals with further target dates, such as retirement.
Financial Resources Available
Before planning your investment, take stock of your resources.
Ask yourself: How much savings can I devote right now? In what proportions should I invest?
Re-evaluate your goals and timeline accordingly, ensuring they align with your current financial capabilities.
Emergency Funds
Build an emergency fund to weather rainy days.
Generally, emergency funds consist of 3-6 months’ worth of living expenses.
Having a safety net where you can quickly access your money will bring you peace of mind when unaccounted challenges crop up.
What to Do with Your Investment Goals?
Craft a sound strategy that regards your goal’s estimated expenses, timelines, risks and market conditions. Here are some tips:
Asset Allocation
Generally, it’s best to set up lower-risk assets before considering stocks with higher volatility.
A good rule of thumb is to diversify your investments to protect your wealth against the market’s unpredictability. So include pension funds, stocks, bonds, real estate, exchange-traded funds (ETFs) and unit trusts in your considerations.
If you depend on only one asset class, you are exposing your goals to costly risk.
Regular Contributions
Set up a systematic investment plan. Contribute a portion of your income regularly so you are inching towards your goals consistently.
You can refer to a dollar-cost averaging strategy to mitigate the impact of market volatility.
Or automate a monthly contribution to retirement accounts such as the Central Provident Fund (CPF) or a private pension fund.
Tax Implication
Don’t overlook the impact of taxes on your returns.
Look for tax-efficient strategies to safeguard your returns.
In Singapore, you can take advantage of tax-efficient accounts, like the Supplementary Retirement Scheme (SRS).
Financial Advisor
Seek guidance from an expert who understands the local market to make an informed decision.
A financial advisor in Singapore can provide personalised guidance based on your financial goals and advise you on investment options available locally.
Review and Adjust
Regularly review your portfolio. Once every quarter or twice a year.
Use your investment goals as benchmarks, measuring if your investments bring you closer to your financial goals. Check the performance of your portfolio to see if they need any adjustments. If your financial situation evolves, you might have to update your approach.
Remember, the investment landscape in Singapore has specific opportunities and regulations that may change from time to time. So, staying informed about the local financial market is important as well.
Takeaway
Wealth building relies on your investment goals greatly.
Anchor your investment plans by knowing your goals, setting a timeline, and understanding risk tolerance.
Rather than investing aimlessly, navigate the market with your well-structured plan and stand a better chance at securing a stable financial future.
So, stay informed and confidently let your investments work towards your dreams.
We hope this article helped you in your investment journey. Share this with a friend who might need it too.
👋 Need additional advice and support on navigating your financial planning? Book a complimentary consultation with us.
The views expressed in this media do not necessarily reflect the views of PFPFA Pte Ltd (“PFPFA”). The information provided herein is intended for general circulation and not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use will be contrary to local laws or regulation. You should also note that the information presented does not have regard to the specific investment objectives, financial situation or the particular needs of any specific individuals; and therefore, may not be appropriate to your individual needs. You should seek the advice of your financial adviser representative or a professional before making any commitment to purchase or invest in any investment product.
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