More often than not, when people talk about their investments, they talk about how well they did versus “the market” or about how much they gained in a single stock. The problem with measuring performance this way is that investing really isn’t like a sporting event where you keep score against an opponent. The only way you “win” is if you have enough money to achieve your financial goals. If you don’t, it won’t matter that your portfolio beat the S&P 500 Index for 10 years straight.
Focus on Results, Not Numbers
When asked about their goals, often people will say, “I just want to have a million dollars by the time I retire.” That is a big round number, but is it enough? Too much? It depends on the type of retirement you want and the sources of income you’ll have available to support you.
Similarly, there are many investors who start selling stocks and buying bonds when they turn 65, because they believe that when they hit this age they need to invest conservatively. It may be the right action and, depending upon the current market condition, it may not even be a conservative move. Interest rate risks and rising inflation rates can devastate bond investments at certain points in an economic cycle.
If a person turning 65 today is in good health and still enjoys working, they are probably not ready to retire. Even if they are looking forward to retiring, they need to think about how to manage their assets in a way that will support them for another 30 years.
Match the Investments to the Timeframe
The trick to financial planning really isn’t the math as much as determining the journey. Think about where you are in your life and what you want to achieve next. Then, decide what you hope to achieve after that and, from a financial standpoint, what you wish to achieve in the long term.
The list will change over time, and it’ll be different for everyone. However, it may include things like:
- Buy a home
- Earn a graduate degree
- Start a business
- Pay for my children’s education
- Pay off my home
- Buy a family vacation home
- Eat out whenever I want
- Travel more
- See every professional sports team play a game at home
- Afford health care expenses
- Avoid estate taxes for my family
- Support charitable causes
- Retire early
- Just keep doing what I love and not retire
To know what you need to afford what you want requires adding some details to your goals and a timeframe. From there, your advisor can work with you to set a dollar goal and calculate how much you need to save to achieve it, if it is an expense. Your advisor can also help you decide how much you need to invest and how to invest your savings to create enough income to achieve ongoing goals, like retirement.
When it comes to investing, we focus less on the big numbers and more on helping you achieve big results.
For more information on how we approach and deliver goal-driven wealth management services, visit us here or call 630-844-5730. We can’t wait to talk to you about what we can do for you today.
Non-deposit investment products are not insured by the FDIC; not a deposit of, or guaranteed by, the bank; may lose value.