What are Investment Goals?

By Miranda Marquit

One way to move forward with your finances and build wealth is to set investment goals that fit with your priorities and objectives.

For many, investing comes with a vague idea of setting money aside for later, and hoping that the nest egg grows over time. However, you’re more likely to accomplish more with your portfolio when you have specific money goals in mind.

Here’s what you need to know about setting investment goals.

Examples of Investment Goals

When setting investment goals, it helps to understand what you’re trying to accomplish with your money. Here are some common investment goals.

Generate income

Some of your investments might be used to generate income for your use. For example, you might be trying to build a portfolio that offers income. You plan to use that income to supplement your lifestyle so that you can quit your job.

Build wealth for the future

Maybe you’re not as interested in generating income today, but you do want to build a nest egg. The idea is to reach a number that you think will sustain you. Common aims include getting your nest egg to $1 million, or deciding that you can partially retire with $600,000.

Preserve capital

Perhaps you plan to preserve your net worth. Rather than growing your wealth, maybe you’re hoping simply to maintain your capital levels and perhaps receive a little gain on top of that.

Beat the market

For some, there’s a goal to beat a market benchmark. They like the idea of measuring their performance against a benchmark that can illustrate their progress.

Rapid profits

Some investors like the idea of quick profits and engage in speculation to see bigger gains. However, it’s important to note that this type of investment goal can result in losses. Many of those who engage in speculation are used to seeing losses as well as rapid gains.

Maintain liquidity

The idea of having access to your financial resources might be of interest, and so you might invest with the idea of making sure you have access. This might include using investments like stocks and ETFs, which can be converted to cash relatively quickly and keeping money in taxable investment accounts rather than tax-advantaged accounts that come with rules surrounding access.

Using Investment Goals in Your Portfolio

When choosing investment goals for your portfolio, it’s important to acknowledge that you might not have the same goals for all your investments.

For example, you might use tax-advantaged retirement accounts for your wealth-building goal, while keeping some of your money in a taxable account so that it’s liquid and accessible for vacations or other needs.

Maybe, in addition to investing in a retirement account, you also decide you want to generate income by investing in a rental property. You might even decide that you can take 5% – 8% of your assets and use them for speculation, hoping to see quick profits.

The important thing is to have an idea of what you want to accomplish with your money and figure out how much of your portfolio should be dedicated to various goals. You can also shift how you allocate your portfolio as time progresses and review your returns.

Example of multiple investment goals in a portfolio

For my own portfolio, the bulk of my investing still goes toward wealth-building. But you can see that I have other goals as well. I set aside the same amount of money each month for my investment goals, and it’s divvied up by what the money is meant to accomplish.

  • Build wealth for the future: About 70% of my investment contributions are in index products. These keep pace with the market so that I build wealth over time. This money is kept in a tax-advantaged retirement account. I use dollar-cost averaging.
  • Liquidity: Close to 15% of my monthly investment contributions are designed for liquidity. They are also in index products, mostly ETFs that can be handled through market orders. I keep this money in taxable investment accounts and use it for travel or emergencies.
  • Income: I’m behind on the income game, but I recently started shifting about 10% of my monthly investing contributions toward investments that are designed to generate income, including dividend stocks and REITs.
  • Rapid profits: I recently started speculating. About 5% of my monthly investing goes toward penny stocks and cryptocurrencies. It’s money I can afford to lose, although I’ve had some good luck taking profits.

Think about what you want your money to accomplish for you. Then, take steps to create investment goals that are likely to help you move forward. You can accomplish more than one thing with your portfolio.