Why do you want to invest?

Reaching specific life goals requires planning

If you don’t know where you want to go, you’ll find it tricky getting there! Investment goals cover everything from the old adage of saving for a rainy day to planning for a comfortable retirement.

Goal-based investing, which emphasises investing with the objective of reaching specific life goals – such as buying a house, saving for your child’s education, or building a nest egg for retirement – instead of comparing returns to a benchmark.

Whatever your personal investment goals may be, it is important to consider the time horizon at the outset, as this will impact the type of investments you should consider to help achieve your goals. It also makes sense to revisit your goals at regular intervals to account for any changes to your personal circumstances, for example the arrival of a new member to the family or salary increases.

Investment strategies should often include a combination of various fund types in order to obtain a balanced approach to investment risk. And maintaining a balanced approach is usually key to the chances of achieving your investment goals, while bearing in mind that at some point you will want access to your money.

Short Term
Lifestyle planning

Knowing you’re prepared for life’s surprises can take a burden off your mind – and your bank balance. An emergency fund is a pot of money set aside to help you cover the financial surprises that life throws at you. Surprises such as losing your job, needing to make unexpected home repairs, replacing your car or unplanned emergency travel. These events can be stressful and costly, but preparing in advance can be a big help.

Medium Term
School and university fees planning

School and university fees planning may involve the same idea of buying a mix of equities, bonds and other investments in order to build enough capital to pay for future fees. Most are geared to begin paying out after a fixed-term horizon, usually 10 years, with withdrawals allowed incrementally after that to meet the fees. In this way they need to be more flexible than pension plans that pay out on retirement.

For this reason, many parents and grand parents often start planning when a baby is born, which provides a better way to pay fees in monthly payments, making the cost of an independent education or university education more manageable.

Long Term
Retirement planning

The importance of shifting goals can be seen in pension plans, where it is quite common for funds to be more geared towards equities in it’s early stages to try to build capital growth. As the individual grows closer to retirement age, the pension plan will tend to lean more towards bonds to reduce volatility. Exposure to other riskier sectors may also be gradually reduced as the individual ages.

Factors to help you develop your investment goals
Your goal

What are you investing for and how much are you hoping to get back?

Your attitude to risk
How comfortable are you with taking risk with your money, as you may get back less than you invested?

Your time horizon
How long are you prepared to put your money away for?

Income, growth or both
Do you want to look at funds that aim to make regular payments through dividends or interest (like an income), or at those that aim to increase in value over time?

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS.

ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

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