The Importance of Investment GoalsWhy having well-defined goals is an important aspect of investing?
While the idea of an investment, by its very definition, is tempting, investor's should duly educate themselves as to the nature of their investment before going ahead with the investment process. Moreover, they should have a certain degree of clarity in their own minds as to their reasons for investing. Having a clear objective to fall back on is essential to a judicious investment portfolio, especially if the investor does not have oodles of extra money that he or she can afford to write off. Investment without objective is akin to jumping into a pool of water without knowing how deep the water runs; a small miscalculation might cause the swimmer – your investment – to sink. Thus, it is always recommended by amateur and professional investors alike that if one intends to enter the investment market, one must do it with a well laid foundation of realistic goals already in place.
Here are some steps to help you set viable and successful investment goals for yourself.
Ask yourself "Why am I investing?"
Do you wish to get married? Or have children? Perhaps you intend to buy some real estate as security for the future, or maybe your interest lies in simply expanding your income portfolio. Whatever it may be, determine your reasons for investing as precisely as you can. A clear goal will not only guide your investments in a focused direction, but will also provide you with the motivation required to make level-headed investment decisions.
Ask yourself "Am I being realistic?"
A goal that you set for yourself is of no use if it lies beyond your means and ability to achieve it. Plan your investment goals not only based on what you want, but what you have. Allocate your funds wisely. Do not commit to investing a certain amount of money if you cannot afford to, and do not take uncalculated risks. If short-term income is your goal, do not invest in long term financial securities and vice-versa. Remember, investments are prone as much to depreciation as they are to appreciation, and once your invested capital becomes subject to market risks, you will have to accept whatever returns it brings you, whether profitable or otherwise.
Divide your investment goals into smaller, achievable targets.
Your final aim as an investor might be to accumulate immense riches in ten years, but where do you see yourself in five years? How about one year? Rather than chase the long-term dream, pay attention to short-term realities by setting milestones for yourself, milestones that can be achieved by slow and steady progress. This will not only make your investment portfolio more manageable, but will also open up newer investment avenues along the way.
Start small, and keep it simple.
Begin with small investments, and observe how they grow over time. Judging by the progress of or damage suffered by your investment, you may or may not choose to invest more money, in either the same or different investment instruments.