Start planning for your investment goals

If you knew you had to be somewhere you had never been by a certain time for something really important, would you just get in your car, start driving and simply hope you reach your destination on time?

As much as you might love a good road trip, it isn't a reliable strategy for getting where you need to be when you need to be there. Instead, you'd probably input your destination into your GPS and look for the easiest or fastest route. This way, you would know exactly where you’re going and how long it will take. Along the way, you might encounter a few detours to refuel or even stop at that restaurant with the sign touting, "Best BBQ in the country." The GPS can help here, too, allowing you to accommodate the change in plans while still keeping you moving in the right direction.

Identify goals for your portfolio

When considering how best to steward your financial assets, it is helpful to consider the “why” of your portfolio. Just what is all that money being invested for anyway? This is where identifying goals is so important.

In the short term, you may have plans for an upcoming wedding, travel, college expense or a home purchase. Long-term goals may include maintaining your standard of living in retirement or leaving a legacy.

A good starting place for creating and maintaining your goals is to create a personal balance sheet, wherein you put all your assets and liabilities on one page. From there, you can derive your net worth. Once you know the “here” of your current financial status and have identified the “where,” you can determine how to get there.

In a financial context, that destination is your investing goal. For example, maybe you want to pay off your student loans or have enough money to retire. You may begin to ask yourself, "What should I be doing to plan for this goal? How much money do I need to reach my goal? Am I on track to reach my goal?" These questions may scratch the surface only, but it's easy to see how quickly you can get lost without some sort of financial GPS, so to speak.

First you need to think about your unique situation and determine:

If you’ve answered these questions, you can move forward with putting a plan in place if you don’t currently have enough money to reach your goal. The first step is to get invested. The sooner you begin to invest, the more time your money has to grow. Today, digital platforms make it easy to get started with just a few dollars.

Once your strategy is underway, it’s important to evaluate, monitor and reassess on a regular basis. Things change, and that's normal. Just don't forget to update your goal and plan accordingly.

If you want to explore more yourself, check out J.P. Morgan Online Investing. If you would prefer to work with a J.P. Morgan advisor, reach out or stop into one of our Chase branches.

How to get started on a financial plan

“Wealth is about the freedom to do what you want to do when you want to do it,” said Samuel Palmer, General Manager of Chase Sapphire and former Head of Product & Experience at J.P. Morgan Wealth Management. “It’s the freedom to take time off of work to pursue a passion, to start a business, to retire early, to focus on personal health.”

But it turns out that our own psychology often gets in the way of reaching our financial goals. Palmer zeroed in on three concepts to help novice investors get out of their own way and get started planning for their futures:

First, it’s important to understand the power of compounding, as it’s one of the main keys to building wealth. Compounding essentially means earning interest on interest: the money you initially invest will generate earnings from the principal amount and accrued earnings from past compounding periods. The power of compounding can help your wealth steadily increase as you invest. And it has the potential to supercharge your money, especially over long periods of time.

Next, present bias refers to the natural human tendency to focus more on our current situation than on the future when making decisions. This, in turn, can lead us to prioritize immediate satisfaction over future payoffs. That might look like watching another hour of TV instead of going to sleep or spending $1,500 on a new designer handbag or set of golf clubs you don’t need instead of socking that money into a retirement account.

Saving is the third concept Palmer focused on, and ideally, automating it so you get to a point where you’re not thinking about the money you’re setting aside for your future goals.

What are investment goals?

Your investment goals are the financial objectives you hope to achieve through your investment portfolio. They can be anything, from earning a specific return on investment to using investment income for a relaxed and comfortable retirement. These goals are often set to be achieved hopefully within a specified time period. Investment goals vary between investors but are generally shaped by a few factors:

Setting investment goals

Setting your investment goals takes more than picking a number or an idea out of a hat. Investors that align their goals with the factors we discussed above tend to have more clarity and direction in their investment choices. Here’s how you might consider setting and prioritizing your goals:

Choosing your financial destination

It might help to begin with an end in mind. What do you hope to achieve with your investments? This could be anything from a major purchase, funding education or planning a comfortable retirement. Your objectives are the foundation for your investment goals.

Establishing financial priorities

Not all goals carry equal weight. Determining which objectives are immediate and which can wait helps many investors organize their portfolios and planning. For instance, your child’s college tuition might take precedence over a vacation fund. Setting clear priorities early can help you allocate resources effectively.

Using S.M.A.R.T goals

Many investors use the S.M.A.R.T. framework – aiming for investment goals that are Specific, Measurable, Achievable, Relevant and Time-bound. Used across various fields for setting clear and actionable goals, the S.M.A.R.T. framework might help you add structure to your investment goals.

Building out your investment strategy

A big part of setting and achieving your investment goals is building your personal strategy and action plan. After choosing a general type of investment strategy, you’ll also need to consider things like your timelines, risk tolerance and major milestones you’d like to work toward.

Types of investment strategies

There are many investment strategies to choose from. Some may be better suited for your personal investment goals than others.

Aligning with time horizons

Your time horizon may greatly influence the investment vehicles you might consider. For short-term goals, some investors may favor more liquid options, so their funds remain more accessible. For more long-term goals, they may be more willing to consider buy-and-hold investment strategies or investment vehicles that take longer to mature, such as retirement accounts and long-term bonds.

Considering risk tolerance

Your risk tolerance may similarly favor certain investment strategies over others. More conservative investors might gravitate toward investments that are generally considered more reliable, such as government bonds, blue-chip stocks or fixed deposits. Investors who are more comfortable with risk may be willing to pursue more volatile assets with higher potential for both risk and reward.

Meeting milestones

Some investment vehicles are tailored to specific life milestones. Investors with an eye on specific goals, such as retirement or funding their child’s education, may explore options like 401(k)s or 529 plans. Many of these accounts provide certain tax benefits that other investment vehicles may not.

Investment goal tips

Here are a few points that might prove helpful while working toward your investment goals:

Regular reassessment

Markets and personal circumstances change. Regularly reviewing your investments could help keep them aligned with your goals. This doesn’t necessarily mean reacting to every single market movement but rather periodically observing your portfolio’s performance and adjusting in pursuit of your goals.

Avoiding emotion-based investing

Emotion-based decisions may not align with your investment goals and strategies. Making choices based on reliable data and long-term objectives, rather than short-term market fluctuations, tends to produce more informed decisions and often benefits portfolios.

Starting sooner

The principle of compounding suggests that the earlier you start investing, the more potential there is for growth. Starting early provides investments with more time to possibly grow and provide returns – returns which could be reinvested.

Seeking professional advice

While many resources can provide information on individual investments, consulting with financial professionals may offer more specialized advice. A qualified financial advisor has the experience to provide insights that can align with your specific financial situation. Whether it’s understanding investment strategies, tax considerations or portfolio diversification, a professional’s perspective may be beneficial to many investors.

When to start investing for long-term goals

Think investing is only worth it if you’re young?

Think again.

While you’ll potentially reap greater benefits by starting your investment journey when you’re younger, the fortunate reality is that you can take steps at any stage in life toward building and/or diversifying your financial portfolio.

The reason financial advisors recommend investing sooner than later is because time in the market typically benefits investors over the long term. Let’s illustrate this with an example.

A 35-year-old woman starts investing $100 a month, which grows to approximately $80,159 by the time she turns 65 based on hypothetical forward-looking returns of 5% in a balanced portfolio. But let’s say she waited until she was 45 to start investing the same monthly amount – this would only give her returns of about $39,944, nearly half the amount she would have received had she started investing 10 years earlier!

Do 10 years really make that big of a difference? When it comes to investing, almost always. This is because markets have historically trended upward despite experiencing periods of market volatility.

In sum, the sooner you can start your investing journey, the better. Moreover, it’s worth embracing a longer-term mindset when it comes to investing, as time in the market is your friend. Even though past performance doesn’t necessarily indicate future results, staying invested for the long term will likely help your money grow over time.

Don’t miss out on potential growth – begin your investment journey today!

Spending down your accounts to meet your goals

When you rely on your portfolio to generate the money you need to fund your living expenses, deciding how much you need from your portfolio and how to draw funds in a tax-efficient way can benefit the value of your plan. Consider this three-step process:

First, figure out what your spending needs are or will be. This often includes not only your day-to-day expenses but also annual gifts to charity and family members and other big expenditures that may not come up as regularly.

Conducting a goals-based analysis can help you understand whether you can achieve your spending goals, whether you should prioritize certain goals over other goals, or whether you may need to reduce your spending target.

Second, once you know how much you would like to (and can) spend to fund your lifestyle, calculate how much guaranteed or otherwise reliable cashflow you have (or will have) in order to figure out whether you have a shortfall and, if so, how much you will need to withdraw from your accounts. Sources of cashflow may include:

Third, after receiving and using all of your guaranteed income, begin to draw down from your accounts to satisfy the balance of what you need to fund your spending goals, generally using the following order:

Financial planning with an advisor

Life is unpredictable. Your plan should reflect this reality. Creating a plan on your own is definitely better than creating no plan at all. You can even use a digital planning app to help you achieve your goals.

However, the combination of using an app and working with an advisor can be even more beneficial. An experienced advisor can help you evaluate the strengths and disadvantages of different paths toward your goals.

Because people often make emotional decisions around money, a planning professional can serve as a coach whose objective perspective may help you steer clear of emotional reactions and adverse outcomes. After the plan is in place, an advisor can continue to help through ongoing monitoring.

The bottom line

A set of clearcut investment goals can help provide structure and measurability to your investment planning. Informed investment goals reflect your time horizon, financial objectives and risk tolerance. Just remember that it might be wise to regularly review your investment goals to ensure they’re still reflective of your financial situation. As always, it may help to consult with a financial advisor to ensure your portfolio’s alignment with your investment goals.

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