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Why We Set Investing Goals

A favorite part of my job is talking with clients about what’s on their minds. One of their most common questions is, “How should I navigate this market?” In general, I hesitate to answer questions like this because it means reducing the short-term unpredictability of the markets and the intricate world of investing down to a single universal truth. That said, there is one piece of advice I give freely: Set specific, measureable goals.

Ask 100 investors to describe their most important investing goal, and they will likely say, “save for retirement.” And while that is hugely important, it’s too broad to be useful. A more helpful goal would include a dollar amount and time frame. So, “save for retirement” might become “save $750,000 by the time I turn 60,” which is much more tangible.

The beauty of setting specific goals is that you’re investing on your terms—you’re not just saving for retirement; you’re saving for your retirement. It’s easier to commit to a goal when you know exactly what it will take to get there. In fact, research shows that investors who establish a plan to help them reach their goals tend to be more confident about the outcome than those who don’t.1

Setting goals also makes it easier to evaluate your portfolio’s performance and make adjustments when needed. Market benchmarks are useful in measuring the performance of individual investments, but they can’t tell you if you are saving enough or taking on the right level of risk. Using goals as a yardstick for long-term performance also allows you to rise above short-term volatility. If you’re meeting your savings goals and your portfolio allocation reflects your tolerance for risk, you’re less likely to overreact when the market gyrates.

I’ve found that it helps to establish different accounts for different goals because each one has unique circumstances. For example, if you have 30 years until retirement but only 10 until your child leaves for college, you’ll want to invest those savings differently. Separating the funds into unique accounts allows you to more easily make goal-specific investing decisions and monitor your progress.

Of course, setting realistic goals requires making assumptions about the future, including how much money you’ll need and how soon you’ll need it. For help crunching those numbers or stress-testing your assumptions, call us or stop by a branch. Our investment professionals would love to discuss where you’re headed and how we can help you get there.

The Importance of Setting Investing Goals

Walt Bettinger

President & CEO

1 According to a Schwab survey of 1,000 retail clients in December 2015, 57% of clients with a plan are extremely/very confident that they will reach their financial goals, versus 37% of clients without a plan.

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