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When planning to start something new — whether it’s your first or your 100th time — creating a plan without a clear purpose behind it will likely result in an unsuccessful plan. This is especially true when it comes to investing.

Investment strategies created with a purpose help investors more precisely choose where, when, and how to invest. When you know what purpose you’re investing for, including what goals and objectives you want to achieve, it becomes easier to consider what strategy to use.

New investors often only think about one way to invest. However, when considering one’s purpose for investing, the best strategy becomes clearer and may involve multiple types of investments.

There is no magic investment

The idea that there is a single “best” investment strategy is a myth. How you make investments depends upon several factors, such as your financial circumstances and what assets, liabilities, and responsibilities you have. Many people have created successful investment formulas, but that doesn’t mean they are applicable to everyone. If there were such a strategic formula to guarantee a specified return rate, everyone would have caught on to it by now.

The magic of investing really comes down to patience. Long-term investments almost always perform more successfully than the market when investors try to time the withdrawals of their holdings. A long-term investment strategy usually requires holding investments for more than a full year. Generally, the most sought-after investments are asset class investments, specifically stocks, which “...have generally outperformed almost all other asset classes. The S&P 500 returned an average of 11.82% per year between 1928 and 2021,” reported Investopedia.

This is why developing and understanding your purpose for investing — and sticking to it — is so important; by building a strategy that aligns with a specific purpose, you won’t be tempted to jump into an alternative strategy that doesn’t align with what you are aiming to achieve. That’s not to say an investment strategy won’t ever need to change, but there will be more clarity around whether or not a change in strategy is needed.

How purpose helps navigate a volatile market

Essentially, a volatile market is when there is a lot of uncertainty or risk related to the number of changes in the value of an investment, resulting in its rate of security decreasing. The higher the volatility rate, the more often a security’s value changes. If an investment’s volatility rate is low, then it will not fluctuate very often. When choosing an investment strategy based on a specific purpose, volatility usually doesn’t mean much as it’s considered when initially choosing the strategy.

Purpose-driven investment strategies help investors better understand volatility to know when to hold or shift. It’s important to understand that no investment strategy is guaranteed to avoid volatility, but with a purpose-driven investment, investment intuition is higher, making it easier to discern how to navigate the market. Investors can more easily track the progress of investments, the prioritization of goals and objectives, and the outcome — rather than the process — by evaluating these components to the purpose of their investments and their overall strategy.

Knowing when to completely change strategies becomes more natural with purpose-driven investments. While the best way to win the race is slow and steady, that approach isn’t necessarily one to adhere to at all times. The market changes daily, and opportunities may arise where it’s smarter to revise one’s investment strategies rather than stick to the initial one. It’s easier to remain faithful to a purpose-driven strategy than a single investment strategy because the focus is on the result, not the journey.

Investing is more about one’s personality and goals rather than the process of obtaining large amounts of money. Consider hiring an investment expert to help set up and manage your investment strategy, but don’t allow them to lead you astray without a purpose-driven strategy first.