Why you should begin by setting your financial goals

While most people realise and appreciate the value of mutual funds for retirement planning and saving, far too many investors lose out since they do not realise they usefulness in meeting a wider variety of financial goals. To get the most out of investing, or not investing in mutual funds therefore, you really do need to determine and spell out your financial/investment goals. Several questions worth asking include … “what are your motivations for investing? What do you expect to do with any profits or returns your investments will provide? When do you expect to start drawing out these profits? Are you aiming for a lump sum payment in the future, or would you much prefer monthly income?”
One of the primary determinants for the ideal investments for you, is the amount of time you are prepared to invest for, before drawing out either income or capital. This period of time will generally be considered as short term, long term, or increasingly, some combination of the two.
Short term goals
Any financial targets you hope to hit within the next one to three years, are generally regarded as short term goals. There are many reasons why people set short term financial goals. Popular reasons, include
- holidays both domestically and abroad
- replacing an ageing vehicle
- replacing or upgrading and upgrading appliances and equipment within the home
- paying for home improvements
- increasingly, paying for elective cosmetic surgery
- saving for a significant social occassion like a wedding
As you can see from the list above, while the goals are quite different, they do share a couple of common traits. Firstly, and possibly most importantly, they generally cost more than many people are able to fund from a single salary payment. Secondly, while this might be the case, the total expenditure for each of the goals is small enough that it can be accumulated by anyone with a regular income, who embarks on a concerted saving and investment effort. It should also be pointed out, that the majority of these goals cover spend that is elective, and whose exact timing can be decided by the individual. This is true, particularly in cases where the investor has a couple of years to invest and accumulate the money before the expenditure is due.
Money market funds are a type of mutual fund that is particularly suited to any savings plans, targets, and investment goals that are up to three years away. One key advantage of money market mutual funds, is that while any money invested grows slowly, this growth is steady and predictable, with little to no fluctuation in the value. This low volatility makes money market mutual funds particularly appealing to investors who will need to draw out their investments in the short term, and would be unable, or unwilling to hold onto the investment for the longer term, to recover from any short term depression in the asset value.

While most people realise and appreciate the value of mutual funds for retirement planning and saving, far too many investors lose out since they do not realise they usefulness in meeting a wider variety of financial goals. To get the most out of investing, or not investing in mutual funds therefore, you really do need to determine and spell out your financial/investment goals. Several questions worth asking include … “what are your motivations for investing? What do you expect to do with any profits or returns your investments will provide? When do you expect to start drawing out these profits? Are you aiming for a lump sum payment in the future, or would you much prefer monthly income?”
One of the primary determinants for the ideal investments for you, is the amount of time you are prepared to invest for, before drawing out either income or capital. This period of time will generally be considered as short term, long term, or increasingly, some combination of the two.
Short term goalsAny financial targets you hope to hit within the next one to three years, are generally regarded as short term goals. There are many reasons why people set short term financial goals. Popular reasons, include- holidays both domestically and abroad- replacing an ageing vehicle- replacing or upgrading and upgrading appliances and equipment within the home- paying for home improvements- increasingly, paying for elective cosmetic surgery- saving for a significant social occassion like a wedding
As you can see from the list above, while the goals are quite different, they do share a couple of common traits. Firstly, and possibly most importantly, they generally cost more than many people are able to fund from a single salary payment. Secondly, while this might be the case, the total expenditure for each of the goals is small enough that it can be accumulated by anyone with a regular income, who embarks on a concerted saving and investment effort. It should also be pointed out, that the majority of these goals cover spend that is elective, and whose exact timing can be decided by the individual. This is true, particularly in cases where the investor has a couple of years to invest and accumulate the money before the expenditure is due.
Money market funds are a type of mutual fund that is particularly suited to any savings plans, targets, and investment goals that are up to three years away. One key advantage of money market mutual funds, is that while any money invested grows slowly, this growth is steady and predictable, with little to no fluctuation in the value. This low volatility makes money market mutual funds particularly appealing to investors who will need to draw out their investments in the short term, and would be unable, or unwilling to hold onto the investment for the longer term, to recover from any short term depression in the asset value.

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