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The 3-Step Method To Goal-Based Investing

Last Updated on by King Iphy

You’re probably wondering: How does goal-based investing work?

The idea is pretty simple.

Instead of investing with one or two specific goals in mind, you create a set of investing goals that you want to achieve. You then make a plan to reach those goals. This approach to investing is ideal for people who are new to investing. It’s also a good way to keep investing exciting.

It’s a way for you to think about your investment in a more holistic way. And it can help you to feel even more in control of your finances. The more in control you feel, the more likely you are to stick with your investing plan. And the more likely you are to succeed.

This article explains how goal-based investing works in detail. If you’re new to investing, this article will give you an easy-to-follow process for setting investing goals and reaching them.

goal-based investing

What Is Goal-Based Investing?

Goal-based investing basically means that you create a list of investing goals that you want to achieve. Why is this a good idea?

Because it encourages you to think in broader terms. It’s less limiting. You’re not limited to a single goal as you are with target date and balanced funds. This is also a good approach to take if you want to keep investing exciting. If you want to keep your money working for you, you want to think about how you want to achieve those goals.

This approach to investing is ideal for people who are new to investing. It’s also a good way to keep investing exciting.

It’s a way for you to think about your investment in a more holistic way. And it can help you to feel even more in control of your finances. The more in control you feel, the more likely you are to stick with your investing plan. And the more likely you are to succeed.

If your goal is to reach financial independence, then you need to think in terms of decades, not years. And to reach financial independence, you are likely to need to be conservative with your investments.

The point is this. If you want to reach your goals, you need to think about how you’re going to get there. And goal-based investing is an easy way to do this. You can write down the goals that you have for your future retirement and see where your money should be going.

It’s a simple process, really. But it does take a little bit of planning and effort.

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Why People Prefer Goal-Based Investing

Finally, let’s talk about why this style of investing is a better choice for you.

Here are just a few of the reasons why goal-based investing is more suitable than traditional investing:

It’s More Flexible – Traditionally, you set up your investment plan according to your age, with a target-date fund or other balanced funds as a good starting point.

With goal-based investing, however, you can create your own plan based on what you want to achieve. Whether you want to retire early or want to buy a house within a certain timeframe, you can set your own goals.

And the more goals you create, the easier it is to make sure that you’re sticking to a strategy that is suitable for you.

It’s More Personalizable – With traditional investing, it’s easy to get stuck in a rut. Your plan is fine for most people. But if you want to retire early or buy a house, you’re probably out of luck.

Goal-based investing gives you the flexibility to tailor your plan to your specific needs. And, again, the more goals you have, the easier it is to make sure that you’re sticking to a strategy that is suitable for you.

It’s More Adaptable – One of the beauties of goal-based investing is that you can adapt it to your changing needs and circumstances.

So, for example, if you find that you’re making more money than you expected, you can change how much you invest and when you invest it. You can change your goals, too.

You can even switch to a different investment strategy entirely if you’re not happy with the one you’ve chosen!

Step 1: Create Your Investment Goals

The first stage in goal-based investing is to list out the goals that you want to achieve. These should be big, bold, and ambitious goals that you want to achieve with your investments. Goals that are unlikely to be achieved through traditional investing.

Why is this a good idea? Because it will help you to think in a more strategic way. And it will also help you to set goals that are more likely to be achieved. So think about what you want to achieve and make a plan to reach those goals.

Step 2: Set Up Your Investment Strategy

Once you’ve decided on your goals, the second stage is to create a strategy to reach those goals. This strategy should take into account the different types of investment funds that you can choose from. For example, does the plan include stocks, bonds, ETFs, or other types of investments?

As well as the different ways that you can achieve your goals, you should also consider the different ways that you can reach those goals. Are there different ways to achieve your goals? For example, is there a way to achieve some of your goals through your employer-sponsored retirement plan?

Step 3: Get To Work

The last step in goal-based investing is to get to work. You should actually be investing money now, rather than waiting until you reach your goals. There is no point waiting until you reach your retirement age to start investing. It’s just not realistic. You need to start now, while you still have a full-time job.

And once you have begun to invest, you need to stick to your goal-based investing plan. You should also note that goal-based investing does involve some risk. You can’t just invest any money that you have lying around.

You need to make sure that the money that you put into your investments is money that is legitimately going to work for you.

Conclusion

Goal-based investing is a great way to think about your money. You get to set a number of investing goals. And then you create a plan to reach those goals.

It’s a good way to keep investing exciting. And it can help you to feel even more in control of your finances. The more in control you feel, the more likely you are to stick with your investing plan. And the more likely you are to succeed.