How To Set Your Investment Goals

Written By
I. Mitic
July 10,2023

Simply investing money without knowing why isn’t a good strategy. The aim of the game isn’t purely to bump up the numbers in your bank account but rather to achieve something you want from life. Your goal may be financial freedom, a comfortable retirement, or enough money to pay for your child’s college education.

Setting investment goals is all about discipline, and it’s something every investor should do before buying their first stock, bond, or gold coin. Knowing the purpose of investing keeps you motivated and encourages you to keep saving your hard-earned money year after year until you get to where you want to be.

In this post, we explore why having an investment plan is important and how to create one. 

Why Do Investors Have Goals?

Research shows that goal-setting is vital for the human psyche. People who write down what they want to achieve tend to be more successful in life than those who don’t. 

For instance, a 1979 study of MBA students found that after just ten years, the minority who wrote down their goals (a modest three percent) wound up earning more than the rest of their cohort combined. 

Goals are beneficial for several reasons. Short-term investment goals instill daily discipline in people, encouraging them to do the hard things required today to make life better in the future. 

Long-term investment goals are more inspirational in nature. They’re big picture goals that give investors their ultimate “why” for doing what they do. They motivate people to stay on track. 

What Does a Good Investment Goal Look Like?

Many investors follow the SMART goals framework to thrash out what they want to achieve. Under this scheme, investments should be: 

  • Specific, detailing what you want to achieve, why, how much you intend to invest per month, and how much you want your portfolio to be worth in the future
  • Measurable, meaning that you should have specific dollar amounts in mind when you make your calculations
  • Attainable, meaning that it should be something you can realistically do, given your current position, earning power, personal attributes, and capabilities
  • Relevant, meaning that it ties into your broader life goals (such as fitting in with your health or personal relationships goals)
  • Time-bound, meaning that you should know how long it’s going to take you to reach various investing milestones

Here are some investment goals examples that use the SMART framework:

  • “I want to save $250,000 for my retirement over the next ten years.”
  • “I want to put $2,500 into the stock market monthly to achieve an estimated net worth of $1.5 million in 20 years.”
  • “I want a $50,000 travel fund by 2030 to take a year off to explore the world.”

How To Create An Investment Plan

Learning how to write an investment plan is critical for long-term success. Here’s what to do:

Define the Purpose of Your Investments

Defining the purpose of your investments shows you what you are aiming for and makes the sacrifice of getting there worthwhile. Types of investment goals could include:

  • Having enough money to retire comfortably
  • Being able to retire early
  • Having more money available for family planning
  • Being able to educate your family
  • Paying for big life events, such as travel or weddings
  • Having an emergency fund or safety net

Don’t blindly copy other investors’ goals. The objectives you choose should apply to you and your financial situation. 

Choose Your Strategy

Once you know your financial goals, you’re ready to choose a strategy. The one you pick should correlate with your objectives. 

As you might imagine, there are several approaches to investing, all with different aims and intentions. These include:

  1. Growth
  2. Wealth-maintenance
  3. Cash flow

Most investors put money into the markets to grow their wealth. They are willing to forgo the consumption of goods and services now to have more in the future.

Growth investing involves buying higher-risk stocks and bonds that offer greater returns. It can also mean buying appreciating assets, such as real estate, precious metals, and cryptocurrencies.

Most investors looking for growth invest over a long time. Accepting more short-term fluctuations in their portfolio’s value grants them access to higher long-term returns. Because of this, growth investing is best for people with a time ahead who don’t require cash today. 

By contrast, those looking to preserve their wealth are often individuals nearing the end of their careers and approaching retirement. Their goal is to maintain the value of their portfolio, not take risks growing it. Retirement goals examples could, for example, include having enough money to live comfortably until 95 or receiving a regular dividend income of $3,000 per month.

Lastly, some people prefer to invest, so they boost their cash flow. These people often want extra money so they can afford a more lavish lifestyle today.

From an investing perspective, this means buying high dividend-yielding stocks that provide cash payments in addition to regular pay. It might also mean looking for ways to lend money for interest, max out your IRA, or invest in real estate for rental income. 

Settle on an Amount

When it comes to investing, youth and time are your friends. If you have a shorter time horizon or are older, you’ll need to invest significantly more each year to reach a particular financial goal. 

Those saving for retirement can work out roughly how much they need in savings by certain ages using a heuristic formula developed by Fidelity Investments. Under some general assumptions, it should look something like this:

  • 1X your desired retirement income in savings by 30
  • 3X your desired retirement income by 40
  • 7X by 55
  • 10X by 67

For instance, if you want to retire on an annual income of $75,000 per year, you’ll need $75,000 in your portfolio at 30, $150,000 at age 40, and so on (assuming that you allocate half to equities and get a historical rate of return). 

If you have a different investing goal, you’ll first want to work out when you’ll need the money. For example, if you’ve just welcomed a new child into your family, you have 18 years to cobble together money for their college fund. Likewise, you might have less than twelve months if you want money to go on vacation next summer.

Measure Your Success

Lastly, goals-based investing requires you to measure your success regularly. This helps you see if you are on track or need to improve as you go. 

At the end of every financial year, look back at your brokerage account history and add up the total amount invested. Then break it down into monthly amounts to see whether you’re contributing enough. 

If you aren’t, you can make subtle course corrections. Perhaps you could take on a side gig, shoot for a promotion at work, spend less on entertainment, or temporarily move to a smaller place. 

Don't beat yourself up if you fall off the bandwagon for unexpected reasons. In investing, consistency over long periods is what makes the difference. 

The Bottom Line

Investing is an exponential game. Things start slow but accelerate tremendously over time. Therefore, you can afford to set aggressive investing goals. Make sure they follow the SMART framework and reflect your personal lifestyle goals.


How can you make your own investment goals?


Start by considering what you would like your money to achieve. If you aren’t sure what to do, find a sample investment plan and then adapt it to your circumstances.

What are the different types of investments?


Analysts classify types of investments into three general categories: growth, maintenance, and cash flow. Growth is all about building your net worth, while maintenance is about keeping it at the same level. Cash flow relates to choosing a portfolio asset allocation that will deliver cash to monthly your brokerage account and your regular income from employment.

What type of investment is the best?


The best type of investment is the one that helps you move towards your investment goals the fastest. Quality investments might include Certificates of Deposit (CDs), money market funds, corporate bonds, government bonds, index funds, individual company stocks, and ETFs, depending on your objectives.

About author

For years, the clients I worked for were banks. That gave me an insider’s view of how banks and other institutions create financial products and services. Then I entered the world of journalism. Fortunly is the result of our fantastic team’s hard work. I use the knowledge I acquired as a bank copywriter to create valuable content that will help you make the best possible financial decisions.

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