What is investing? It is getting your money to work for you. To do this, you need to ask yourself:
What is the money for?
What do I want to achieve?
When do I want it to occur?
How much will it cost?
Be realistic in setting personal goals. What do you want to accomplish, and what can you reasonably expect from an investing program? Over the long term, the stock market returns an average 12% per year. Therefore, a goal of 100% a year would be unrealistic.
How long before you plan on using the money? Are you planning for retirement, a child’s education, or world travel in 10 years? These are the types of questions you need to answer before you can develop a strategy and plan to attain your goals.
Setting measurable and realistic investment targets requires practice and discipline. The importance of starting to invest early and adding to your investments regularly cannot be repeated enough. In this topic, you will practice estimating future value for your goals.
Goals should be specific and measurable. Goals that are vague or not measurable are more difficult to achieve. After all, how will you know you have arrived if you didn’t know where you were going?
These goals do not meet the criteria of specific and measurable. Until these personal goals meet these criteria, setting financial goals is not possible. Setting such qualified goals will drive your future investment decisions. For example, you may know that you need R400, 000 in 15 years for a major expenditure, such as University Fees. How much you need in the future to meet a specific goal, R400, 000 as in this case, is known as future value. Knowing future value enables you to estimate what you need to reach your goal.
Let’s look at how investment decisions can affect future value. Suppose you have R10, 000 today to either invest or spend. You are 25 years old and interested in investing. You are curious about the potential benefits if you were to begin to save now for your retirement. Your goal is to retire when you reach 60. Financial goals are highly individualized. As an investor, you will want to know how future value applies to your goals. Once your goals are set, a professional financial advisor can offer you intelligent and targeted suggestions to meet those goals.