Basic Strategies

Investing to Reach Your Goals

Most people invest to achieve a goal, the most common being retirement and college. Making a plan improves your chances of success, even for shorter-term savings goals like a house down payment, vacation or car.  When investing for a goal, consider these questions.

  • When will I need my investment?

  • How much will I need?

  • What is the best account type, taxable or tax-advantaged?

Answers to these questions will help determine how much risk you can take, how much you need to contribute and what type of account you should consider.


Time

The length of your investment time horizon will determine the level of risk you can afford to take. Within your personal risk boundaries, it is appropriate to seek higher returns and risk when a goal date is more than 10 years away. As the goal date nears, shift to more conservative, lower risk investments.


Amount to Invest

When determining the amount you will need to reach your goal, consider what will be needed, adjusted for inflation. The longer your time horizon, the greater the difference between what is needed to pay for your goal in today’s versus future dollars.


Account Type

It is generally best to utilize tax-advantaged accounts if available to you. Despite some restrictions, these retirement and college accounts offer advantages.


Adjusting Your Choices

Things change over time. Certain funds, like target date mutual funds and advisors will actively adjust your portfolio mix as your goal date nears. The level of risk you take 15 years, or 5 years from your goal date is not the same.  If you manage your own investments, adjust your asset allocation and contributions each year to improve the likelihood of reaching your goal.

Building Your Portfolio

Throughout your life, your financial objectives and needs change and your investments will need to keep pace with those changes. These sample portfolios help illustrate how you might structure your investments at different times in your life. These are guidelines; your personal situation should be considered as you make your investment choices.

Sample Investment Portfolios

PortfoliosSample Investment Portfolios


Throughout life, your financial objectives can change dramatically, and your investment portfolio must keep pace with those changes. These sample portfolios illustrate how you can allocate investments at different stages in your life. These are only examples; each person’s situation is unique and should be reviewed regularly to take into account changes in lifestyle, life events, job changes, health and other issues. A professional financial advisor can help you structure a portfolio to meet your unique needs.

Young Professionals

Investment Goal:

Maximum long-term growth.

Singles and young couples have the advantage of time in planning their investment future. With no dependents and no need to supplement income, they can afford a relatively high degree of risk.

  • Growth funds to maximize capital.
  • An IRA or retirement plan to maximize tax-deferred growth.
  • Automatic Monthly Investments; increase when possible.

Working Family with Young Children

Investment Goal:

Long-term growth without high risk.

Working couples with children need to build assets while meeting major needs: a home, college for children and retirement. Combined income puts them in a higher tax bracket, so they need to lessen their tax burden with IRAs or other retirement plans.

  • Growth funds to maximize capital.
  • Municipal bond funds and tax-free money market funds for safety and  tax-free income.
  • An IRA or retirement plan to maximize tax-deferred growth.
  • Automatic Monthly Investments; increase when possible.
  • Set up college funds for the children.

Peak Earners with Older Children

Investment Goal:

Long-term growth and current income. Reduce taxes.

With children nearing college, maximize current income and take advantage of high-earning years to growth retirement assets. Tax reduction strategies should be in place.

  • Invest in a blend of funds for growth and income.
  • Retain a cash reserve.
  • Continue funding for college and retirement.

Empty Nesters

Investment Goal:

Continue funding for college and retirement.

Free from child-rearing and education expenses, it’s time to invest in more conservative funds for tax-free income and capital preservation. Continue to build assets for retirement.

  • Invest in a mix of short-term and long term municipal bond funds
    for tax-free income.
  • Divide remainder between growth funds and a money market for cash reserve.

Retirement

Investment Goal:

Current income and protection of principal.

Now’s the time to enjoy your income from retirement investments, but not time to stop investing. Protecting your assets is a priority now, as well as current income.

  • Divide investments among value funds, bond funds and money market funds.
  • Retain cash for unexpected medical or care needs.