Investing 101: Start with an End in Mind

Last Updated on: September 17, 2023

Before starting your investing journey, ask yourself, “What do I want to achieve?” People invest for various reasons, but two of the most common answers are to make their money grow and to beat inflation.

Though there is nothing wrong with growing your money and beating inflation, I believe that the reason should be more.

What do you want to do with the money you will gain after years of investing? Because if your only goal is to accumulate money, you may be missing the point of investing in the first place.

Setting a Goal.

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Like many things in life, you need to have a goal – which is your dream with a deadline and, most often, with a price tag.

Setting a high goal should not scare you. What you should be afraid of is a wasted life wrapped in mediocrity. However, setting your expectations on your capabilities and life circumstances is crucial.

Most of us dream of having a good life and buying big-ticket items like a beautiful house, a fancy car, a good education, and traveling now and then. But as many as those who dream, it is almost as many who fail.

So before you start placing your hard-earned cash into any investment vehicle, you should first know where you’re going to use it, when you will use it, and how much you need to accomplish your goal.

Start with an end in mind.

How to Set a Financial Goal?

Many of us are already familiar with the acronym SMART in goal-setting, which can also be used in investing. But for those who forgot, they are:

  • S — Specific. State what your EXACT goal is. Examples are a house, car, kids’ education, or retirement
  • M — Measurable. How much do you need?
  • A — Achievable. What steps do you need to take to achieve your goal?
  • R — Relevant. Is it aligned with your other goals or current situation?
  • T — Time-bound. Most importantly, your investing goal should have a deadline. When do you wish to buy/achieve your financial plan?

Some examples of financial goals are your child’s education, retirement, house or car, or emergency fund.

Where Should You Invest?

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Investing 101: Start With An End In Mind 4

Where you invest should depend on your goal instead of investing mindlessly for the sake of investing. For instance, if you retire in five years, investing in the stock market wouldn’t be wise because of its volatility.

On the other hand, you can’t maximize your investment potential if you are only 23 years old and saving in a time deposit for your retirement.

Simply put, your investment goal should align with your time horizon. So, where should you invest?

A. Investments for Short-Term Goals

For short-term goals or less than three years – you should invest in low-risk, low-return products like bond funds, money market funds, short-term corporate bonds and time deposits. This will preserve your investment capital.

You can also put your money in high-interest savings banks, yielding a consistent monthly income that will easily beat traditional banks.

B. Investments for Medium-Term Goals

The best investment vehicle is the balanced fund for medium-term goals or goals that are more than three years but less than ten years.

Since it is a moderate risk, your capital will be invested in a mix of low-risk and higher-risk investments.

Low-risk investments, like bonds and money market funds, are mixed with high-risk instruments like equities. You may even add a PAG-IBIG MP2 Investment.

C. Investments for Long-Term Goals

For long-term goals that are more than ten years. The best investment is in equity funds like the stock market. The time component will normalize the high risk. So, the longer you invest, the safer the stock market gets.

However, it is still best to note that high-risk investments, like stocks, can only offer a high potential return, which doesn’t guarantee a positive return.

Final Thought:

It is human nature to dream and dream big. But dreams will always be dreams unless we take action. Place a deadline and a price tag, and you have yourself a goal.

Investing is just a means to an end, just like money is a tool. Having more cash should never be your ultimate goal. It should be used to enjoy and experience our God-given time.

This post may not consider other circumstances, but if God puts you in your current situation, He will push through. We have to let Him. Happy investing, and God bless.

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