Like any good trip, we need to know where we’re going before figuring out how we’re going to get there.
Investing this way helps us meet our needs, live the lifestyle we want, and reach our highest aspirations.
Dangers of winging it
Without goals, our investment decisions are aimless, and we’re more likely to be disappointed by unrealistic expectations of what investing is or what it can do.
We’ll also be more likely to make rash decisions, causing mistakes that can set us back significantly.
There isn’t one ideal strategy for investing, and there isn’t a perfect investment either.
One isn't better than the other, and there aren’t objectively “good” or “bad” investments. They all have their advantages and disadvantages, making it difficult to make investment decisions unless we have goals to lead us.
Stopping points along the way
Our goals create destinations that we can use as a guide.
Some goals focus on growing our portfolio’s value, some aim to generate income that we can live on, and others look to minimize taxes owed. Each of these goals will lead to a different set of investment strategies - as different types of assets and accounts will be better suited to achieve each of these goals. Picking the "best" strategy is about choosing the one that gives us the highest chance of achieving our objective.
Start thinking about what your goals are. What do you want to do in life, why do you want to invest, and is there something you are investing for? While your answers will be highly individual, the SMART framework provides the steps to make your goals even more helpful. It’s normal for your plans to change over time, but your strategy and investments will change with them.