How to Set Yourself Investing Goals

January 29, 2021 15:15 UTC

If you are new to the investment world and are wondering how and where to get started, your first step should be to set yourself investing goals. As a beginner investor, or trader, setting yourself goals to work towards helps you manage your progress, improves your motivation and gives you a better chance of success.

What Do Good Investment Goals Look Like?

Before we look at what kind of questions you should ask yourself when setting these goals, let’s examine what qualities good investment goals should have.

Specific and Measurable

When it comes to investing, any goal which you set yourself should be both specific, measurable and have a timeframe in which to achieve it. In doing so, progress towards your goals will be easier to follow and keep track of. 

For example, you should say something along the lines of “I am going to invest £250 each month”. Here you have a clear amount which you can easily establish at the end of each month whether you have achieved or not. Saying you want to invest money is all very well, but you need to quantify it.

Alternatively, you may look at it from another perspective and say “I want to make £100,000 in the next ten years from investing”. Regardless of which way you look at it, setting a definitive objective will help make your investing goals easier to evaluate.

Realistic

It is no use setting yourself a target which you will never achieve, your goals need to be realistic. Of course, what is and is not realistic will vary from person to person. It is all very well to say, “I want to make £1 million by my 30th birthday” but you need to calculate beforehand whether this is actually feasible.

If you only have the capacity to invest £2,500 a year, then making £1 million before you are 30 is not a realistic investment goal. 

Questions to Ask Yourself When Setting Investing Goals

Now that we have an idea of what characteristics are required for good investment goals, let’s take a more in depth look at some of the specific questions you should be asking yourself.

How Much?

As we have already touched on above, you need to establish how much you can afford to set aside to invest in a month or a year. How much money are you working towards? The first thing you need to do is determine these numbers.

If you set big, long-term, goals, it is a good idea to break it down into sub-goals to achieve over the short-term. This will help you stay focused and motivated. 

You could set yourself time-based sub-goals (by this time next year..), or performance based sub-goals, such as “in order to make £100,000 in the next ten years, I need to achieve a rate of return of 10% this year, 15% next year and 20% thereafter”.

What Is Your Attitude Towards Risk?

Are you risk averse? Or do you like the sound of the potential extra reward which comes with it? This is undoubtedly a crucial point to establish when setting investing goals, as it will play a large role in which investments you will be targeting.

Although there can be greater reward investing in the equities market, it does come at greater risk. However, it is important to bear in mind that there is far more to choose from than just stocks. Other investments, such as government bonds, may provide less reward but they also benefit from less risk. 

What Is Your Time Horizon?

Have you got some spare capital you want to invest in the short-term? Or are you happy for your money to be invested over the long-term?

Like the previous question, this will shape which kind of investments will be suitable for you. No matter how tempting an investment opportunity may appear, if it does not fit in with your timeframe then it might not be a good idea to go for it.

For example, if you have £50,000 which you would like to invest, but you will need the capital back in five years time to put a deposit down on a house, this will limit your options.

What Is Your Motivation?

What is the reason behind your investing? What are you trying to get out of it? Are you investing to achieve financial independence 30 years in the future? Or to be able to buy a house in the nearer future?

Some people just save and invest out of natural inclination, however, if there is an underlying motivation driving your desire to invest, it can be helpful to include this in your investing goals as it may help shape your investment portfolio.

Will Your Ethical Values Influence Your Investments?

Although it may seem like a strange question, peoples ethics can play a large role in what they will and will not invest in. Are you comfortable investing your money in companies engaged in oil exploration? Or holding shares in defense related companies?

ESG (Environmental, Social and Governance) investments are becoming increasingly popular among investors, meaning that there are plenty of options out there for people with whom ESG is important in achieving their sustainable investing goals.

Final Thoughts

When it comes to investing, setting your goals out as early as possible helps to avoid complications further down the line. 

Of course, this article contains just some of the factors which you should be considering, it should not be treated as a fully comprehensive guide but rather used to help you on your way.

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

Roberto Rivero
Roberto Rivero Financial Writer, Admirals, London

Roberto spent 11 years designing trading and decision-making systems for traders and fund managers and a further 13 years at S&P, working with professional investors. He has a BSc in Economics and an MBA and has been an active investor since the mid-1990s