Setting Investment Goals
If you are like many individuals who have a financial dream
such as being comfortable in retirement but have no idea how
to invest in order to achieve it, take heart. According
to Pat Swanson, CFP® and families specialist with Iowa State
University (ISU) Extension’s Invest Wisely Project (www.extension.iastate.edu/investwisely),
there is a way.
“Individuals spend more time planning a summer vacation
than they do setting investment goals,” Swanson says. “To
focus on your dreams, establish specific investment goals. Then
you are more likely to be successful.”
Swanson says to write down your goals. Putting them on
paper reminds you of their significance and can motivate you
to do what you need to do to achieve them. Most individuals
have more than one investment goal. However, Swanson advises
not to have so many competing goals that you become discouraged.
Also, divide them into short-, medium- or long-term goals.
Short-term goals are those that can be accomplished within the
next two to three years. Having a specific dollar amount
for a car in two years is a short-term goal. Medium-term
goals are those that could be accomplished within the next three
to ten years, for example, having a fund for a child’s
college education. Long-term goals are those that take
more than 10 years to accomplish, for example, having a nest
egg to fund retirement.
Swanson also suggests that investment goals should be SMART – specific,
measurable, attainable, reviewed, and time-related. A specific
goal is one with dollar amounts and dates established for an
identified purpose. Decide on a regular amount to invest
weekly, biweekly, or monthly to accomplish your goals. Be
realistic and establish attainable investment goals given your
financial situation. Review your goals regularly, for example,
annually, to see if you are on target or whether revisions need
to be made in your investment plan.
Have a timeline for accomplishing your goals. For example,
suppose you want a retirement nest egg that will yield $1,000
per month to supplement your pension. If you plan to retire
in 20 years, you will need to put $150 a month in investments
averaging a 10 percent return to have a $114,000 nest egg at
“If you don’t know where you are going you can’t
choose the right path to get there. By establishing specific
investment goals you have a road map to achieving financial success,” Swanson
ISU Extension Invest Wisely Project provides a series of
newspaper, radio, and web resources for investors. It is funded by
a grant from the Investor Protection Trust (IPT). The IPT
is a nonprofit organization devoted to investor education. Since
1993 the IPT has worked with the States to provide the independent,
objective investor education needed by all Americans to make
informed investment decisions. www.investorprotection.org.