Goals and Investing

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.

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.

A Closer Look:  Sample Investment Portfolios     CHART # 10