How to Identify Your Investment Goals

Every investor should have his or her own goals in investment, which are influenced by long-term or short-term necessities and requirements. With the help of this guideline, you can coordinate with your financial adviser more effectively in meeting your investment goals.

Identify Your Needs and Set Goals.

Identify Your Needs and Set Goals.

The foundation of your relationship with a financial adviser is built by this initial step. Mull over your long-term and short-term objectives in life. For instance, consider your children’s college education requirements, your family’s plans for traveling, or even your retirement necessities. You should pinpoint these things to your financial adviser. By doing so, he or she will be able to respond to your needs directly. This is one reason why we tell you in the Stock Signals Philippines that your stock investment decision must conform to your personal financial goals.

Understand Your Resistance to Risk.

A risk could be described as your asset values’ changes or investment vulnerability. Personally, risk could pertain to the probability you will not achieve your targets or lose grip on your fund reserves. Each investor has a different risk tolerance. When you understand yours, you can tell at what price you should cut your losses when you trade stocks.

Over time, your risk resistance may alter. Risk is very complex to determine for it interrelates to a very personal prominent attribute. At times, the level of your confidence in taking risks depends on your emotional capacity. Nonetheless, your potential to carry on with risks relative to your financial needs and current wealth is also essential.

People who ask “Should  I sell this stock now?” are the people who trade without knowing their risk tolerance level. Do not start trading or investing in the stock market unless and until you know your risk tolerance percentage. If you will violate this non-negotiable rule, your experience will be more painful than profitable.

The amount of risks you could bear on may also depend on your age. There is lesser time for you to take a leap from poor investment when you are older. Your desire to take risks may also be different, resulting in a probable alteration in your finances and situations.

In addition, you would likely have a different type of permissiveness in terms of your portfolio components. For instance, you may have varying risk tolerance on education fund and retirement investment.

Watch this video from Investopedia to learn more about risks.

Investment Decision-Making and Income.

Investment Decision-Making and Income.

Your decision with regards to investments is greatly influenced by your income, whether it is your absolute financial source or requirements. People who presently compensate for investment taxes or taxable investors are required to make pronouncements based on returns after tax. This is different from the situations of investors who defer taxes.

There are investment options that appear more attractive due to their after-tax returns. This is in a particular situation wherein tax rate concludes your income level. Riskier selections may be chosen by high-income investors for they could bear losses and effortlessly impart additional investment budget after.

Reliance on your portfolio in sustaining your income requirements may result in limited portions you could take in investments that are not fluid and profitable.

Open Up About Your Tax Situations.

Open Up About Your Tax Situations.

Your financial adviser should be informed on your special tax situations or current circumstance, which may be applicable to your investment decisions. For instance, this information will enable you to identify which securities you should add to your portfolio, either sheltered or exempted from tax. Moreover, tax circumstances or requirements will give your financial adviser idea on how to use investment accounts covered by taxes effectively.

Beyond Your Investment Portfolio.

Beyond Your Investment Portfolio.

The investment goals you hold onto beyond your portfolio should also be regarded. For instance, expansion of your new investments should be done if you have a significant share in your family-owned business wealth. Additionally, your return goals and security portfolio’s risk permissiveness may be affected by your deferred spending, anticipated pension, or Social Security benefits.

Setting Investment Goals Relative to Time.

Setting Investment Goals Relative to Time.

Your investment goals will be built relative to your time horizon. You could determine this by determining the time to draw on your assets for the portfolio. Moreover, you have to select between short and long maturity securities. You also have to identify your recovery capacity from a weakening market. Lastly, find out whether you need conservation for your capital or not to conform with your immediate financial requirement.

The Fluidity of Your Portfolio.

Your financial adviser should know if you need a fluid portfolio or you could afford to wait for a fair market value.  Liquid assets you could consider are publicly offered bonds and money market funds. Generally, lower return is expected from more liquid investments. Alternatively, investments that are not liquid are those private equities, real estate properties, risk-reducing ventures.

Watch this video from Investopedia to learn more about liquidity.

Disclose Your Finances Completely.

Disclose Your Finances Completely.

Your coordination with a financial adviser will be more effective if you make known your financial assets, obligations, and anticipated flow of income. Anything that could affect your investment portfolio must be informed to your adviser. Other things you should determine are the retirement plan your current occupation may provide, the possibility of obtaining stock-purchase arrangement from your employer, and the effects of obtaining tax-deferred or tax-sheltered assets from your job.

Getting It Done. Your financial adviser will help you determine all of the aforementioned specifics for a more effective investment plan. Through your answers, a savings course will be designed by your adviser. With a harmonious coordination, you would easily identify your return rate target and the suitable components of your portfolio.

About the Author
The Stock Signals Philippines is the online news media arm of Equilyst Analytics. Inc., an SEC-registered stock market consultancy firm in the Philippines that guides Filipinos on long-term investing and short-term trading and offers mentoring services.

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