Courtney Myers Blog | How to Set and Reach Time-Based Investing Goals | Talkmarkets

How to Set and Reach Time-Based Investing Goals

Date: Saturday, August 18, 2018 8:49 PM EDT

Why do we invest? For most of us, the answer is that we put aside money today to help ensure that we have a more comfortable and profitable tomorrow. By its very nature, investing requires a long-term mindset. When we design our retirement portfolio, we usually do so knowing that the gains we earn over the next few decades won’t be immediately available or useful to us, but they will be there when we need them the most. To this end, it can be helpful to set investing goals that center upon specific time horizons. Here are a few ways to get started and considerations to keep in mind.

The Relation Between Risk and Time

As a general rule, the longer you have until retirement, the riskier you can afford to be with your investments. Why? If you have plenty of years to ride them out, the inevitable ebbs and flows of the market won’t feel as bumpy. However, if you’re a late investor and only have a short amount of time to retirement, you’ll want to be more risk-averse in your choices, as you don’t have the luxury of time to watch the highs and lows even out into a smooth uptick.

Keep in mind that what is appropriate when you’re years from retirement will likely require some tweaking as you near retirement age. For instance, aggressive growth stocks might make sense when you’re in your early 20s. In your late 40s, however, you may want to start adjusting your risk comfort level and take a more conservative savings approach. The same applies if you are currently investing in your employer’s stock ownership plan. While this can be a valuable company benefit, be wary of putting all of your eggs in that basket. What happens if you’re months away from retirement and a market crash occurs and takes the value of your company down with it? Suddenly the retirement you’ve been looking so forward to is postponed until you can get back on your feet financially.

These scenarios help explain why you should work with your financial advisor to develop an investment portfolio that is tailored to your individual timeline and investing goals. Taking this proactive step can help ensure that you are allocating your assets appropriately and aren’t surprised by any turn of events.

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