Know the terrain — Dissecting investment goals

The key identifiers of great investment goals. Understand them well to tread on the right path.

Keep your head down, and work towards your goals (img src)
  1. Tax saving
  2. Saving up for downpayment on a home purchase
  3. Wealth

WHY SETTING INVESTMENT GOALS IS IMPORTANT?

It helps you keep a close eye on where you have been in past, where you are at present, and where you would be in future. Goals become important because they pertain to your personal finances, and hopefully lead you to the state of financial independence.

WHAT MAKES AN INVESTMENT GOAL “GOOD OR BAD”?

The simplest answer is simplicity and clarity.

Therefore, your investment goals should have the following three traits:

#1. They should be measurable

Clear. Concise. Definite.

Saving Rs. 10,000 per month towards downpayment of a home purchase (in 5 years).

As your capability to invest in this goal increases, you can change the figure from Rs. 10,000 to Rs. 15,000 and so on.

  • You can continuously monitor your targets vs what you are actually investing to understand whether you need to reduce your goal.
  • If you are being left with surplus cash month-on-month, you would know that you are capable of increasing the figure further.

#2. They should be reasonable and rational

Take the example of the goals we set earlier.

Saving Rs. 25 lacs in 3 years for downpayment on the new house

AND

Saving Rs. 10,000 per month towards downpayment of a home purchase (in 5 years)

They do not indicate the same goal, with the only difference being in their representation. They are altogether different goals.

#3. They should be aligned with your broader objectives in life

Despite the fact that many of us are chasing money day in and out, what you need to realise is that money is not the only thing that matters. Sure it is important, but it is important because it is tool that exists to serve you — make your life better, give you the experiences that make you happy, add value and utility to your life. Those — the things that money helps you do — they are the things that really matter. Money is just a means to an end.

THE SHORT AND CRISPY VERSION

Always have goals - be it in life, or your investments. Goals help you stay focussed, give your investments a sense of purpose, keeps things aligned. Having goals would also mean that you won't be flying blind anymore. Instead, you would be aware of the direction you need to take, and also be able to evaluate if you need to do some correction in your course at any stage. Without goals, you would be like a ship lost at sea.
There are three basic things you need to keep in mind while making investment goals:#1. Your goals should be concrete, crisp and clear. In one word, measurable.#2. They should be reasonable and rational. Just because you make your goal to be like Hercules and move mountains, won't make it so. So, be reasonable in setting your goals.#3. They should be aligned to your broader objectives in life. If one of the things you want to do in life is to complete the Ironman Triathlon, one of your goals in near future would be to start getting fitter, more athletic, with more stamina. Start aligning your short term goals with your long term ones.

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Abhishek Anand

Helping businesses grow 10x faster, and scale efficiently. Top Writer — Quora, Medium. Drop in a line if you’d like help with yours. mail@abyshake.com