When it comes to investing, you probably have set some goals for yourself. Unfortunately, they are bad goals. Don’t get me wrong, goals are important. But you have to be setting the right type of goals if you want to be successful, especially when it comes to investing. In this post, we will run through the type of goal you are probably setting now, why it’s bad and how to set the right kind of goals.
Your Current Investing Goal
If you are like most people, your investment goal consists of ‘saving for retirement‘. While this seems like a good goal, in reality, it is a poor goal because it isn’t specific. The reason ‘saving for retirement’ is bad is because you have nothing to base it off of as to whether you are on target of reaching your goal or not.
This will lead to you buying and selling and chasing returns, all of which will hurt you in the long run. You might even give up, thinking that retirement is unachievable for you.
The Right Way To Set Goals
In order to be successful investing, you want to set specific goals that you can measure. So instead of having a goal to simply save for retirement, you want to have a certain dollar amount at a certain age.
So a good goal would be ‘to have $1 million dollars by the time I am 65’. Making your goal specific this way will allow you to measure your progress along the way.
When you are 45, you can see that you have $300,000 saved and that given your rate of return and how much you save, you are on target and can feel confident in reaching your goal. If on the other hand you realize you are not on track, you can take the necessary steps to get back on track.
The more specific you can be with your goals, the more likely you will be to not give up and reach the goals.
Having An Investment Plan
The best way to go about setting specific goals is to build an investing plan. This will take a little bit of time, but it will pay off greatly in the years to come. Not only will it help you to set goals that you can measure your progress against, but it will also help you to navigate the waters when the stock market drops or it becomes wildly volatile.
By having a plan that spells out why you are investing in the assets you are and why you are investing in the first place will help keep you focused on the long term and not easily give into the craziness of the moment.
When it comes to investing, you want to make sure you not only have goals but also that the goals you set for yourself are specific in nature so that you can measure your progress towards attaining them. The more specific you are, the less likely you will be to fall for the common traps of taking on too much risk or trying to earn an unattainable rate of return.