We’ve discussed the importance of not just saving money, but of how you need to assess your risk appetite as well as create specific financial goals. By creating different savings goals, you also create opportunities for different savings and investment strategies to reach those goals.
“Diversification is important for all aspects of investments,” explains Richard Cayne of Meyer International. “You can create a specific account or portfolio for each goal and invest as is most appropriate to achieve the amount you need.”
Each type of goal has its own risk tolerance
While you may separate your goals into short-, medium-, and long-term periods, you may need to consider a little more when it comes to how you accrue each amount. Although you’ll probably want to put more of your savings into the short-term goals, since you’ll need those first, you also want to make sure there’s enough going into the longer-term goals.
By weighing the time-frame for each goal, how much you can save over those times, and what is your risk tolerance for each, you can begin to create a specific investment strategy for each financial goal. For example, you want to save up to take a three-week holiday next summer. You might think you can work for a windfall in the stock market in a year with a minimal amount. But are you willing to risk having to stay at home next summer since you’ll have a limited time to reach your goal, and there’s a high chance that a year is not enough time?
You may be better off investing your savings on a long-term investment like for a home or for retirement, where you’ll be able to wait out volatile periods for greater returns or to have the opportunity to hedge your investments to offset some of that risk.
Ask for help to ensure prudent planning
Yes, there can be a long list of concerns and issues you must consider while planning your finances. And you’ll need to revisit your plan as time passes and circumstances change. But this is not something you have to face alone. Consult with a financial consultant such as Richard, to fully investigate your options. You may discover strategies that will make all this go so much smoother!