Goals Based Investing

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Goals Based Investing

In the previous episodes of the investing shots series, we discussed Investing Like A Professional, Asset Types, Asset Allocation, Risk Management, ETFs and Mutual Funds Explained, and Sector Investing. Today in the series, we talking with Wendy and Eric of DIY Fund about Goals-Based Investing.

It’s funny because this was the 7th episode we recorded; however, halfway through the conversation, I realized that it probably should have been the first episode we recorded. Before you even begin to think about investing, you need to understand why you are investing and what you are trying to achieve. Goals based investing is the best way to match your investments with your life expectations.

PODCAST NOTES

  • Goals-based investing is probably the most important topic of this series and should actually be the first step for DIY Investing.
  • Some questions to ask to determine your investing goals are (1) why are you investing? (2) what do you hope to get out of your investment portfolio?
  • Goals-based investing and asset allocation go hand-in-hand together.
  • You have more goals than just retirement, and the way you invest is different for each goal.
  • Some life goals are (1) retirement, (2) college savings, (3) buying a house, etc.
  • Some performance goals are not wanting to lose money, wanting to get a certain % return, wanting to receive dividends, etc.
  • All your goals are intertwined and affect each other.
  • Shannon wants listeners to know that you invest for multiple reasons and you want to know what you are investing for and why, when, and how you need the money you invest.
  • Like having multiple savings accounts for different savings goals, it makes sense to have multiple investment accounts for multiple life goals.
  • There are investing vehicles for different goals that might make you want to have separate accounts for specific goals.
  • It is easy to determine long-term goals and short-term goals but harder to determine the goals in the middle of those two time frames.
  • Shannon advises to never have opinions with your core portfolio.
  • Take risks with your other portfolios!
  • Dividend-paying stocks, bonds, etc. can provide some reliability for income even when the price goes down.
  • TAKEAWAY: Think about why you are investing, what your goals are, and make sure you have your asset allocation/investments match your goals and you will sleep better at night!

What goals are you investing for? Do you have separate investment accounts for separate goals?

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Shannon is a financial planner who left a “traditional” financial services firm to start her own company, The Financial Gym, because she felt traditional financial services firms did not have the tools or resources to help people in their 20s and 30s who are starting out and trying to build assets while also managing debt. She realized that the key to long-term personal financial success is a commitment to financial fitness and making smart financial choices. Through her blog, Financially Blonde, her book, Train Your Way To Financial Fitness, her podcast, Martinis and Your Money and The Financial Gym, Shannon is committed to making financial fitness fun, easy and accessible for everyone.

3 COMMENTS

  1. Great topic. I think having a goal in mind is great, but you can’t panic when the stock market doesn’t align exactly to your plan. I have a friend who had socked away $60k into stocks and it was meant to pay for his next house (down payment + renovation). Plans changed when he lost 2/3 of the value of his portfolio. If he had been focused on his goals he would have realized he needs to get into some safer stocks ASAP, especially if he planned on using it within a year or two.

  2. My short-term goal is to pay off debt! I think my fiance and I can achieve that goal this year if we stick to our plan for a very frugal wedding! It’s hard when friends and family try to push you to have an extravagant affair but we’ve stuck to our guns thus far!

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