We all want to retire rich and enjoy a comfortable retirement, but that goal is just not specific enough. There is a difference between a dream and a goal. A goal is a dream, but with a dealing. To achieve your goal you must, as I always say to my clients, “dream in color”. You need to be extremely specific, and vision it to every detail.
Example, where will you retire is not enough, think about what your home will look like, what will your day consist of, what kind of car will your drive, and where will you travel to?
Once you have your goals and objectives in place, it should then be coordinated with your savings and investments. Having goals are the foundation of success, but then one must take it to another level and align those goals with your individual investment policy. Picture investments as a road to achieving your goals.
I also like to tell my clients: if you do not define your goals, any investments will do. So often I speak to people about the planning I do and probably 8 out of 10 times they will say “I am all set”. But are they really? I would say probably only 1 out of 10 people I come across have an investment policy that coordinates with their goals.
No Investment Policy!
Just as it important it is to have your goals and objectives clearly stated, it is equally important to align those goals with a written Investment Policy Statement (IPS). An IPS serves two purposes:
1) It provides perimeters of how your money will be invested and allocated among various asset classes
2) It provides you with “policy” to review when your investment objectives seem in doubt.
Review, Review, Review!
With the best intentions you went to a financial advisor about six years ago when you changed jobs. The advisor put together a well thought out IPS and invested it accordingly. You review your statements quarterly and for the most part have been happy. But have you reviewed your IPS? Have your own individual goals changed? Do you know, even though you see the investments have gone up, that they have gone up enough to keep you on track with your goals? Maybe you review your investments and see you received 6% over the last six years. But did you realize that to achieve your goal of retiring at age 62 you needed to achieve a 9% return each year? Probably not.
I recommend that everyone review with their advisor annually or when a significant event occurs or is about to occur in one’s life. At that time, goals, objectives, and investment policy should be reviewed and, if necessary, changes should be made to align goals with investment allocation.
Too often people come to me and their past investment returns are like being on a treadmill; it serves the purpose of doing a cardiac activity, but you do not go anywhere.
Too often, people’s investments “don’t go anywhere”. Why? They are always reading about the next great investment and they get into it, but it does not go anywhere. Or a friend tells them that Stock X is going to be the next Apple and they buy it, but it does not work out for them. I have seen people literally come to me after chasing return for 20 or more years with no accumulation.
Investing in individual stocks is gambling, it is speculative. It is ok to do that with a portion of discretionary money, but not with money that you have serious lifetime goals. So, stop chasing returns, and have a portfolio built on your goals, objectives, and time frame. You will sleep at night and have a much greater probability of success.
You may have noticed a common theme - understand your goals, align those goals with a specific investment plan, and review the plan. Any successful team can attribute that success to one thing - a game plan.
Your financial future depends on the same - you need to have a plan. Remember that when you hit a fork in the road and do not know where you are going, any road will take you there. With a plan, you will take the road to success that you have created. Remember all teams have a game plan to win the Super Bowl, but only one team wins. So not only do you need a plan, you need a good team around you.
I serve as the captain of clients’ financial team - coordinating their insurance, estate plan, investments, retirement plans as well as their future vision of tomorrow. If you would like a free no-obligation consultation, please feel free to contact me at firstname.lastname@example.org.
*All investing involves risk including loss of principal. No strategy assures success or protects against loss.