Questions to Ask Yourself When Setting Investment Goals
You may have said to yourself that you need to invest, but have you ever thought about why? Having concrete investment goals is important in keeping you motivated and in making the right choices. It’s hard to know what vehicles you should be choosing if you aren’t sure what you want to achieve. However, before you even get to the goal setting stage, there are questions you need to ask yourself first. Based on the answers to those questions, you can set specific short, medium, and long-term goals with time frames to help you start progressing toward your ultimate aims.
First, you need to think about what your plans are for your money. You may have several different ideas about what you want to do with your investments: retire, buy a home, take the trip of your dreams. You might think of each of these ideas as a different pot of money because your approach will probably be different for each one. Your answers to the question of what you want to do with your money may seem like they are the same as your goals, but they are only one part. You need to establish other parameters as well.
Your Risk Tolerance
Even if you have a general tendency toward being fairly risky or very conservative with your investments, you may approach each of your pots of money in a different way. Even a conservative investor may want to set aside some money they can afford to lose for more volatile approaches, such as cryptocurrency or penny stocks. These are high risk but potentially high reward, and with penny stocks, you may be able to increase the likelihood of the reward by reviewing a list of the best penny stocks. You can watch this list closely and make purchases based on its recommendations. Tolerance for risk is also tied into the time frame that you are looking at.
The general rule is that you can afford more risk with a longer time frame. If you are young and putting money toward your retirement, you can put some of that money in riskier investments because you have decades in which any losses can be recovered. For the purpose of goal setting, time is significant because it helps you in creating parameters. Maybe you want to have enough money for a down payment on a house for five years or if you simply want some passive income, less risky choices might better suit you.
You should also consider how you want to track your progress toward your goals. There are online financial planning tools that make this easy. You simply need to input various pieces of information about what you currently have and what you are working toward, and these tools will produce a graph or a score to help you see how you are doing. Alternately, you may want to do your own tracking using a spreadsheet or other tools. Consider as well whether you want to reward yourself along the way and how you will do that.