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.