Why its crucial to set big investment goals
I’m a big believer in setting goals. Goals in any area are important — they give you something to reach for and a way of measuring your performance. Goals are of particular importance in the area of investing because you are dealing with money.
You want to know exactly what you are aiming for financially so you can create a detailed, realistic plan that will help you reach those goals. Without goals, you may invest on a whim or inconsistently, and in the end, you may lose money.
However, if you want to excel at investing and make enough money to retire early and live comfortably, you are going to have to do more than just set goals — you are going to have to set big goals.
Even HUGE goals. Investing is not necessarily something you can approach timidly. Here are some reasons why setting big goals is the best way to get ahead and some things to keep in mind when doing so.
The Difference Between Small and Big Goals
Small goals may be one of several things. They might be easy to reach, quick to grasp, or something you need in the short term. Traveling and buying a new vehicle are short term goals.
Retiring, paying off your home, starting a new business, or paying for your child’s education may be more mid to long-term goals. Smaller goals often don’t take as much planning or work to achieve, and you may not need to invest nearly as much to get the return needed. With your long-term goals, however, know that it is going to most likely take you years to get there.
The Three Parts of a Big Investment Goal
When you are working on your big investment goals, you’ll want to consider three different factors:
- When do you need money?
- How liquid do you need your investments to be?
- How much of a risk do you want to take? Remember, the more time you give yourself, the less risk you need to take.
Let’s break down each one.
When do you need money? Many would say right away, but investors know that they are playing a long-term game. Think of this in terms of big purchases or retiring. Do you want to be able to pay off your mortgage in ten years? Would you like to retire at 55?
Deciding when you want to have a good amount of money on hand will help you determine your timetable and the frequency and type of investments you make.
How liquid do you need your investments to be? The liquidity of an investment is how quickly you can turn that investment into money. Some things such as real estate are not very liquid — it could take months to sell a property.
Stocks can be sold much more quickly, although sometimes that means taking a loss. If you are financially stable and don’t anticipate any unexpected expenses in the short term, you may not need investments that are very liquid. If on the other hand, you know you have some expenses coming up, you may want to make it easier to access cash.
How much of a risk do you want to take? If you are daring and can absorb a financial loss, you may be more willing to invest in high-yield, high-risk investments. If you do not have as many resources, you may want to play it safe and go with investments that aren’t as risky but don’t pay out as well.
If you are comfortable with the idea of losing money, taking significant risks can help you reach your goals more quickly, but it is also possible you could lose big and not achieve the goal you’ve set. It all depends on your resources, your timetable, and what you feel the most comfortable with.
Stating your Goals
You want to make sure that your goals are worded in such a way that they are tangible and will help drive you forward. Let’s look at some goals that don’t fit this description. Most people would write something like this:
- Be successful!
- Make a lot of money
- Retire early
How can you measure those goals? What is success to you? What is a lot of money or being rich? Without having measurable goals, it can be hard to plan your investments.
If “rich” means having a net worth of $50 million dollars, then you will not need to invest nearly as much as you would if you want to join the billionaires’ club. You may also always be trying to reach your goal — you might reach the $50 million mark and decide you are still not “filthy” rich, so you keep moving that goal back.
Here are some much more measurable and achievable goals:
- Have a net worth of at least $50 million by 40 years old
- Acquire 15 properties with a target income yield of 5–6 percent on each.
- Put $50,000 in savings every year for the next 15 years.
- Pay off my home’s mortgage and all credit card debt within 10 years.
You can measure these goals, and you can see how close you are to each of them every day.
Give yourself Time!!!
Remember that no one is going to reach big goals overnight, especially not when you are investing. To make the most from your investment, you may have to wait months or even years to sell property, stocks, or anything else for a large profit.
It may also take some time to find the right investments to make. You do not want to invest in anything that comes along, nor do you want to make an investment without taking the time to do the proper research and determine how much of a risk it will be. You have to have the time to do all of these things. If you rush, you are much more likely to make a bad investment, lose money, and fail to achieve not only your big goal but also some of the smaller goals you set along the way.
Huge Goals are not for Everyone
Finally, remember that setting huge goals is not for everyone. It takes a large amount of work to reach these more important goals, and you often have to be willing to take bigger risks. If you are not a risk-taker or don’t have the resources to absorb such a loss, you may want to rethink setting huge goals.
For those who do have the resources, the drive, and the right attitude, setting huge goals can be a great way of pushing themselves and achieving all they ever dreamed of and more.
Originally published on my personal blog → http://peteresho.com/2016/04/why-its-crucial-to-set-huge-investment-goals/