This article is meant to get people thinking about something more important, more long-term, and more fulfilling than investment management. Okay, I almost wrote that with a straight face—nothing is more important or fulfilling than investment management! But, if something were more important, it would be thoughtful long-term goal-setting.
When it comes to financial planning and investing, many people focus on short-term performance or market trends, often losing sight of the bigger picture. However, setting clear, well-defined long-term goals is the cornerstone of successful investing. As your advisor, it’s our job to guide you through the process of establishing long-term investment goals that align with your values and financial aspirations. Below are six elements that I see as critical to long-term planning and eventual success.
1. Understand Your “Why”
The first step in setting long-term goals is identifying why you’re investing in the first place. What do you want your money to accomplish? Whether it’s buying a home, securing a comfortable retirement, funding your children’s education, or leaving a meaningful legacy, understanding your motivations will help us make more purposeful investment decisions.
Questions to ask yourself:
- What are my top financial priorities in life?
- What milestones do I want to reach over the next 10, 20, or 30 years?
- Do I want to focus on wealth accumulation, preservation, or distribution in the near term?
2. Define Specific, Measurable Goals
In my experience, vague goals like “I want to save for retirement” are a good starting point, but they need to be refined into specific, measurable objectives. Break down your goals into clear figures and timelines.
For example:
- Instead of “I want to retire comfortably,” set a goal like, “I want to accumulate $2 million by the time I retire at age 65.”
- Instead of “I want to save for my child’s education,” say, “I need $200,000 for college in 15 years.”
These specific goals allow us to create a more concrete investment strategy and track your progress over time.
3. Consider Time Horizons
Once you’ve identified your goals, the next step is determining the time frame for each one. A long-term goal is generally one that is more than five years away, but you might have multiple long-term goals with varying time horizons (e.g., 10, 20, or 30 years).
- Short-term (0-3 years): Emergency funds, vacations, home down payments
- Medium-term (3-10 years): Saving for a child’s college education, adding aggressively to investment accounts, or purchasing a second property
- Long-term (10+ years): Retirement, leaving a financial legacy, or other life-stage goals
Your time horizon is key in determining the appropriate investment strategy. The longer your time horizon, the more risk you may be able to tolerate, allowing you to pursue growth-oriented investments.
4. Assess Your Risk Tolerance
This is a topic we will explore frequently in this format and in other communications. When setting goals, we all have specific, yet potentially dynamic, appetites or capacities for risk. Some can handle market volatility, while others prefer a more conservative approach. Understanding your risk tolerance is essential to structuring your investment portfolio in a way that feels comfortable and aligns with your long-term objectives.
Keep in mind that as you get closer to achieving a specific goal, you may want to adjust your risk tolerance to protect your accumulated assets.
5. Systematize and Stay Disciplined (This Is Where We Come In)
The most successful long-term investors are often those who automate their savings and investment processes. Setting up automatic contributions to your investment accounts removes emotions from investing and ensures that you’re consistently working toward your goals. Dollar-cost averaging—regularly investing a fixed amount regardless of market conditions—can also help smooth out market volatility over time. Create a system for adding to your investment accounts—it’s worth it!
It’s also essential to stay disciplined, especially during periods of market volatility. Long-term goals require patience, and reacting emotionally to short-term market fluctuations can derail your progress. This is where we come in. We work together to stay aligned with our strategy and disciplined in how we invest—while remaining flexible enough to shift or reassess when necessary. Determining what is noise versus what is valuable information is increasingly difficult in today’s world, but we must do our best!
6. Review and Adjust Periodically
While it’s important to stay the course, it’s equally essential to periodically review your investment plan and long-term goals. Life changes—like a job change, a new child, an inheritance, or shifting financial priorities—may require adjustments to your strategy. Whether formally or informally, we should aim to review your plan periodically and make any necessary changes to stay on track with your goals.
To summarize, setting long-term investment goals is about seeing the bigger picture and creating a financial roadmap to guide you toward your desired future. By understanding your “why,” setting specific goals, assessing your risk tolerance, and staying disciplined, you’ll be well-positioned to achieve your financial aspirations. Long-term investing is a journey, and the key to success is staying focused, patient, and proactive. We hope to continue working with you to ensure that your investment strategy aligns with your long-term goals.
