Why a Return Goal is Essential Before You Begin Investing

Regardless of age, every man and woman needs to be thinking about retirement. All too often, individuals assume they have time to set aside funds for their senior years. However, things change, and a person might find he or she is lacking the necessary means to enjoy the later years of life.

With the help of a financial advisor in Cardiff, a person can begin investing today and look forward to a better financial future. What is one thing many individuals fail to do when investing? They don’t set a return goal, which is a big mistake. 

Why Is It Necessary to Set a Return Goal Before Investing?

Successful investing requires a plan to be put in place to achieve the desired goal. A person cannot know where they want to go if they aren’t aware of where they are today.

For instance, a person must be sure their income is enough to cover their expenses. If it isn’t, the individual remains poor. 

Furthermore, people want their money to work for them instead of the other way around. This requires knowing what the money is supposed to achieve, and the return goal provides this information. 

The return goal also provides the investor with an idea of how much money will need to be set aside each month for investing. For instance, a person who wants to amass more than $400,000 over a 35-year period will need to invest $250 a month at a minimum of 7 percent per annum to achieve this goal. 

With the return goal in mind, it becomes easier to compare the various investment vehicles to determine which will provide the highest rate of earnings. Doing so allows you to maximize the growth of the investments.

This plan needs to be put into place for a variety of other reasons as well. For example, a person may wish to purchase a home in the coming years. By knowing the return goal, the person can determine how much to set aside each month to have a bigger down payment on the home. 

Investing with the purpose of increasing the down payment is a great way to make your money work for you. Knowing the return goal allows you to determine what percentage of your investment funds should be used for this purpose and which need to be set aside for your senior years. Making a change to one portion of your investment plans will likely require changes to be made in other areas. 

The First Step

Countless men and women don’t know where they stand financially. They have a general ballpark figure when it comes to their net worth but haven’t stopped to determine exactly how much they are worth. Now is the time to obtain this information, as doing so makes it easier to know what the return goal needs to be. 

Make a list of all assets, income, expenses, and debt. Be sure not to overlook assets that may not be obvious, such as a life insurance policy that can be cashed in once the children become adults. Although these funds likely won’t factor into the plan at this time, having this information is still helpful. 

As the plan changes over the years, it becomes easier to make necessary adjustments when all information is already in one central location. Furthermore, it becomes easier to speak to a professional about wealth protection services when this information can be easily accessed. If a change needs to be made, less time will be required to put the new plan into place. 

Determine the Timeline and Your Risk Tolerance Level

When will the funds be needed? Again, things can change quickly and the timeline may need to be adjusted as a result. However, it’s always best to have a timeline in place to anticipate when the funds may be needed before setting a return goal. Changes can be made to this schedule when required. 

Additionally, your risk tolerance level must be determined. This affects your return goal as well because you need to know how much to invest each month and where to achieve this goal. 

For short-term investments, an online savings or money market account is preferred. This option should only be used when you plan to use the funds within three years, as the return is very low. As the funds are liquid, they are easily accessed when needed. 

For longer-term investments, such as when funds will be needed within three to ten years, consider a CD, short-term bond fund, or a peer-to-peer loan. All are good options but have drawbacks that must be considered when it comes to the return goal. 

For instance, a CD is ideal for when you have a hard deadline and is FDIC insured. However, this isn’t a liquid asset and should only be used when the funds definitely won’t be needed for the time period specified in the terms of the CD. On the other hand, short-term bond funds are liquid but often require a minimum investment. 

Understand the advantages and drawbacks of each product before deciding. By doing so, you can ensure you get the right investment for your needs. If the money isn’t needed for more than ten years, additional options are available. 

Equity stock index funds are an option to discuss with a financial advisor in Cardiff and the same is true of equity exchange-traded funds. Robo-advisors and ETFs are other investment vehicles to consider as well. Again, be sure to learn the advantages and drawbacks of each to ensure you make the right decision for your personal needs.  

If you want investment advice, turn to the professionals. Although a friend or family member may have had great success with their investments, this does not mean the same will be true for you. Each person’s situation is different, and this must be considered when comparing the options. 

By speaking to a professional, you can obtain sound advice based on your specific needs and financial situation. Keep this in mind and contact a financial advisor today. You’ll feel better once you take this step knowing you have made a move in the direction of financial freedom.

Piggy Bank

Making the Most of Your Investment

Millions of United Kingdom residents are placing greater emphasis on their future financial health these days. With the cost of living continually rising, making ends meet each month is becoming increasingly difficult. Many are realizing financial struggles following retirement could be even more significant. 

Exploring Investment Possibilities

While a wide range of investment and savings options is available, not all of them equally profitable. Numerous people have jumped headlong into the stock market with hopes of making sizable financial gains on certain promising trades. This approach only pans out for a select few. Far too many enter the market unprepared and ultimately lose out. 

Others prefer to take the safe route, placing their extra income in traditional interest-bearing savings accounts. This solution virtually guarantees the money you save will be available when the need arises, and it’ll grow over time thanks to accrued interest. Though less risk is involved with this approach, people often sell themselves short by exercising such caution.

Individual Savings Accounts are yet another alternative for those hoping to secure their financial futures. Most are aware this option exists, but few truly understand its full potential. With investment advice from knowledgeable, experienced financial consultants, though, it’s possible to maximize your wealth while minimizing the risks.

Delving into the Basics of ISA Wealth Building

Two primary categories of ISAs are available: cash and stocks and shares. With either option, you’re allowed to deposit a certain amount of money each year into the account. Interest earned on those funds is non-taxable, and it doesn’t count towards your personal savings allowance. Both types of ISAs allow you to allot either annual lumps sums or small monthly or quarterly deposits as well.

At this point, the two options branch out significantly. Various cash ISAs are offered. Some allow you to withdraw money when needed much like a standard savings account whereas others are meant to be left untouched for specific amounts of time as is the case with term life insurance. Though the former is helpful in times of hardship, the latter is more likely to remain intact until retirement rolls around.

On the other hand, stocks and shares ISAs give you the option of investing all or part of your savings. Though more than eight million UK citizens currently have an ISA, only about two million of those are taking advantage of this type of account. Those who are adhering strictly to cash ISAs say they’re leery of stock market volatility and unsure of where to invest their money. 

Digging Deeper into Stocks and Shares ISAs

It’s no secret the stock market is prone to highs, lows, and stalls. Experts across the globe advise investors to purchase stocks at their low points and sell them at just the right times to make a profit. Of course, that’s much easier said than done for most people. This is the primary reason so many are hesitant to place their hard-earned money in stock market ISAs.

Still, a number of financial advisors point out placing money in this type of account in small increments and investing, in the same manner, can help offset the potential perils. Many mistakenly believe they’re required to delve large lump sums into such ventures. Understandably, this would leave them a bit tentative about investing as opposed to saving.

It’s also important to keep in mind you don’t have to invest all your savings. Though you can’t open more than one ISA during a single tax year, you have the option of opening multiple accounts over time. Having an account dedicated to saving alone and one for investment opportunities could certainly work out in your favor.

No one can say the future is certain. Most of us aren’t even sure what next week might hold in store. Planning ahead for your financial health can help take away much of the insecurity, though. 

Ample wealth-building opportunities are at your disposal ranging from standard savings accounts and pension plans to playing the stock market. No alternative is without certain risks. Even placing your money in a traditional savings account could quickly take a turn for the worse in today’s fairly uncertain political and economic landscape. 

That being said, ISAs could be a lucrative and flexible option when used to your fullest benefit. You can set up multiple accounts for different purposes, deposit and invest smaller amounts of money over time and profit from the lack of taxable interest among other benefits. With the right strategies, advice and wealth protection services on your side, the future may not be as uncertain as it seems.

Financial Advisor

Cardiff Financial Advisors

Growing wealth over time isn’t easy, and the majority of people simply don’t have the knowledge or experience necessary to draft a workable financial plan. Cardiff residents are certainly no different. That’s why we’re always exploring new and innovative ways to help our clients generate the best returns on their investments.Read more