Personal Brokers help to understand, how to form a long-term portfolio and not be distracted by news noise. You can read the previous articles on our channel. Today we'll talk about setting financial goals.
Wealth Management Consultant
To set a financial goal, you need to clearly understand, when and how much money you need. Can be postponed to education, real estate, travel around the world or your own retirement. For each of the purposes, the terms and amounts will be different.. Therefore, goal setting must be treated, as a process.
Steps to goal setting
• First you need to understand, what resources do you have at your disposal. All tangible assets need to be considered, that you managed to buy, inherit or save to date.
• Next, you determine the amount of fixed costs for the period, for which the goal should be achieved. Usually, it is the cost of maintaining your standard of living.
• The next item is inflation adjustment. It is important to understand, how inflation will affect your fixed costs. In addition, the amount, allowing you to achieve your goal, also varies with inflation.
The information obtained will help determine the required rate of return for the planned investment.. The rate of return must be achievable and consistent with your risk appetite.
The level of return on investment is not always achievable. In this case, it is necessary to change the lifestyle or increase the amount of investment.. Investors are sometimes unable or unwilling to invest enough money to meet their goals.. This leads to frustration in trying to find a tool with minimal risk and excessively high returns..
3 Factor, which need to be considered
Let's move on to the main factors, to consider when setting goals.
1. Age. If you started saving for retirement in 25 years, then it will not be possible to determine the required profitability, since you don't know, how much will you save annually. Assessing needs at a young age is also difficult: you don't know for sure, how many children will you have and where would you like to meet old age. In this situation, it is enough to invest annually a comfortable amount for you..
2. Time horizon. It ends, when you liquidate a portfolio to achieve your goal. If the target was a house or car, then the time horizon is the number of years, during which the required amount is accumulated. If your funds are invested in retirement, then the time horizon is the rest of life.
3. Acceptable risk. On the one side, excessive risk aversion can lead to missed opportunities and hinder the achievement of goals. In the same time, do not go on adventures in pursuit of thrills. Finding a balance is important, which will guide you towards financial freedom and help you achieve results.
Next time we will talk about building an investment portfolio.
If you have a portfolio of securities with a value of 3 RUB million, we recommend conducting an audit - it's free. You will receive a professional opinion from a personal broker, based on analytics from Argus Research and BCS Global Markets.
