Investment Goals and Factors
Investing and Personal Finance
Investment Goals and Factors
How to Choose Risk Tolerance at Investing?
The Main Steps for Investing Beginners
As we discussed in previous chapter investment goals mostly depends on personal finance. You cannot set your investment goals properly if you will ignore other wealth question.
It does not matter whether you are investing for retirement, for a house, for education of the children, for a world-trip or anything else. These reasons are important only because they are needed for financial goal description. Such criteria may be described in few factors:
- Yield that is necessary from investment every year (for retirement).
- Exact amount of money that will be needed at some specific period (for some acquisition).
- What is the sensitivity for volatility?
The mentioned factors do not solve problems by themselves but draw some guidelines for investment goals that are needed for investment strategy.
But the exact criteria for investment goals should depend not only on reason why are you investing but also the whole personal finance:
- How much can you allow to put aside of the funds for investment?
- Is your salary going to increase?
- How high is a probability for you to lose the job?
- How many of the income sources you have?
- What is your income/asset ratio?
- Do you have any children?
Those are only few questions of the many that are needed to be answered when creating complete investment strategy.
There are also other factors that are important determining the return. Even if you will invest only in bonds that have a 10% annual return it doesn’t mean that is your real return on investment.
One important factor is taxes by government. In most of the countries income from investment are charged by taxes. The less yours investments are taxed the better is for you. You have to know tax system at your country and optimize yours investment portfolio for it.
Another factor that affects the real return is inflation. Even if you are yielding 10% annually it doesn’t mean that is your real return. If inflation is also 10% the real return of your investment portfolio is zero.
Inflation is a great danger for any investment portfolio that is based on fixed income investments. Inflation is not always high and sometimes may look insignificant, but you never can be sure that it will not soar very rapidly, which can happen under some specific circumstances.
