What is the best way to determine your investment strategy for your financial goals? (2024)

Key takeaways from this article

• SMART goal setting:

  Define your financial goals using the SMART criteria—specific, measurable, achievable, relevant, and time-bound. This approach ensures you're clear on what you want to achieve and by when, guiding your investment strategy.

• Embrace diversification:

  Diversifying your portfolio helps manage risk while capturing growth opportunities in various sectors. It's about balancing risk and reward to progress steadily towards your financial goals without putting all your eggs in one basket.

This summary is powered by AI and these experts

• Sanjay Rastogi Investor Entrepreneur BE,MBA
• HAN Zhong Liang (韩忠良), CFA, CAIA AD, Investment Strategist at StanChart…

• Diendy Liu Wealth Product Strategy Head at UOB Indonesia

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  3 key points:1. (S)pecify and (M)easure the future value of the goalPlan for the future value of your financial goal. Else, you are almost sure to miss it, due to the depreciation value of money.2. Is it (A)chievable to your current financial capacity and will it be (R)elevant to have the goal at the time thenYour goal must make sense to your current financial capacity, if not, you'll neglect it very soon. Either you improve your capacity or lower your goal. Then, it must be relevant by the time you achieve it. Plan for the needs, not for the goods/services.3. The (T)ime frame of the goal.The longer the time frame, may require less of your financial capacity, but higher uncertainty of how things may evolve. Find the balance.

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  Before diving into investing, it's important to know exactly what you want and when you want it. Think of it like setting a destination on a map. Your goals should be clear, easy to measure, realistic, connected to your life, and have a time frame. Whether it's saving for retirement, a home, or your child's education, having clear goals will guide how much you invest, how long you invest, and how much risk you can handle.

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• Taras Rybak Partner at Fusion Group ✧ Making independent financial advice better, more affordable and accessible to everyone

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  Defining the Risk Profile and Investment Goal or Objective is the first step in your financial planning. Many robo-advisers can help you and create a portfolio based on these 2 factors. However, I would highly recommend seeking help from a qualified financial planner as there are many other aspects that you (or robo-advisers) won't be able to provide, especially when it comes to different investment options available or tax considerations.

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• Jeremy Neil First Vice President, Financial Advisor at Morgan Stanley

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  Material goals like buying a new house, car, etc... are often easy to determine and helpful in creating a financial plan. However, people often struggle with defining their goals beyond this.Determining the meaning and purpose of your wealth should drive your investment decisions and help you define your goals. Ask yourself:What is really important to you and your family?What do you want to spend your time doing?What are your true assets?How wealthy do you really want to be?

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• Jack Ziegler III, CFP® Christian Family’s Financial Planner 🙏 Read Bio and see how…Be Radically Intentional 👊Accepting new clients: generous families/businesses

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  You don’t want to spend your life climbing the ladder only to find that it’s up against the wrong wall!When it comes to any saving we have to know what we’re aiming for.We help clients define their vision, aim their resources and invest with the end in mind.3 simple questions to answer before investing:1. What’s the timeline?2. What are the tax consequences?3. What are the risks? Answer these, aim accordingly, and it’s hard to go wrong.

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• Jeetendar Peswani,CFA Finance Educator | CFA Charterholder | CFP Professional

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  Asset allocation is crucial for achieving financial goals. Properly diversifying your investments across asset classes helps manage risk and optimize returns.Asset allocation is like crafting a personalized roadmap for your financial journey. It's a dynamic strategy that adapts to your evolving circ*mstances and goals

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  In my experience, urgency and importance are helpful parameters in determining asset allocation. High priority urgent goals need a liquid low risk approach. So, short-term high quality fixed income assets work well. Whereas low priority non-urgent goals could follow an aggressive approach. Equity/ private equity/ cyclical assets like real estate may suit. Goals that fall in between need to balance risk, return, and liquidity expectations.

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• Diendy Liu Wealth Product Strategy Head at UOB Indonesia

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  Asset allocation based on - Emergency needs, must meet your 6 to 12 mo needs & expenses. Place this in the safest assets with the lowest volatility. You wont want it in a losing position when you need it.- Medium-term needs. Dont rush to quickly to risky asset, your foundation of wealth is the one to meet your medium term needs up to 3 years. Place it in a more moderate asset such as bond which yields somewhat higher than money market or cash.- Long-term needs. You go to any asset classes as far as your guts allows you. But bear in mind: capital preservation > than capital appreciation. When you lose it all, there's nothing left to be appreciated. Make sure to diversify well, and dont go to stuff that's too good to be true.

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  See Also

  How to define an investment strategyUse These 5 Building Blocks to Create a Sound Investment StrategyCreate your investment planSimple and Compound Interest
  Let's chat about the cornerstone of smart investing—asset allocation. Just like a good chef knows the right mix of ingredients, a savvy investor knows how to blend assets. 📈1.Risk & You: Know thyself, folks! What's your risk tolerance? 2.Time Horizon: Are you in it for the long game or looking for quick gains? 3.Stocks or Bonds: If you can stomach more risk for higher returns, lean towards stocks.4.The Cash Factor: Always keep some liquid assets like money market funds. They're your financial safety net.5.Balance is Key: Mix it up! A balanced portfolio isn't just wise—it's essential for mitigating risks and capitalizing on market opportunities.In a nutshell, asset allocation is your investment game plan. Happy allocating! 🌟

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• Taras Rybak Partner at Fusion Group ✧ Making independent financial advice better, more affordable and accessible to everyone

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  If you are not an investment professional, it will be very difficult to select suitable asset allocation as there are a few stages involved: - asset allocation- asset selection- regular rebalancingThis is a complex subject, seek professional advice or at least use pre-built models (in the case of robo-advisers) that will also automatically rebalance the portfolio for you.

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• Sanjay Rastogi Investor Entrepreneur BE,MBA

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  Diversification can help you mitigate the risk but always remember that big money can only be made by taking concentrated bets/actions. You can earn 12-15% by diversification but can never earn 25% plus.

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  Diversification not only safeguards your investments but also has the potential to enhance returns by capturing opportunities in various sectors. It's essentially a risk management tool that can provide a more stable and consistent path towards your financial goals, making it a cornerstone of prudent, long-term investing.

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• Taras Rybak Partner at Fusion Group ✧ Making independent financial advice better, more affordable and accessible to everyone

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  Everyone understands that diversification is important, but achieving good results is only possible if you are an investment professional. Look for a Model Portfolio Service (Managed Portfolios) that you can use. They will be diversified by default and managed by professionals. Depending on your preferences and views, they can also be implemented via different instruments (ETFs, active funds, etc).

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• Jack Ziegler III, CFP® Christian Family’s Financial Planner 🙏 Read Bio and see how…Be Radically Intentional 👊Accepting new clients: generous families/businesses

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  We believe in modern portfolio theory.We want to take on just the right amount of risk to accomplish our goals. And no more!Diversification helps us lower risk without compromising returns. We look at 9 asset classes and rebalance as different assets go up or down disproportionately. This allows us to buy low and sell high naturally.

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• Farheen Irfan Certified Director | COO @ ACT Engineering | Executive MBA, CGMA

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  In my opinion, a portfolio should have a mix of risky and risk-free assets. A minimum of seven different stocks including growth and value stocks should be part of the basket.

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• Kemi Ojenike Family Wealth Advisory | Law | Communication | Social Impact | I help families identify, preserve and transfer their complete wealth across generations.

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  Maintaining the same allocation indefinitely in a portfolio can be detrimental, particularly when there are significant market changes that impact asset performance. With expert guidance, a portfolio should be rebalanced periodically. By this, the weightings of different asset classes will be adjusted to the required levels to meet set goals.

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• Taras Rybak Partner at Fusion Group ✧ Making independent financial advice better, more affordable and accessible to everyone

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  Usually, for a specific goal, you would use risk-weighted portfolios, and typically, there are 5 of them based on the level of risk:- Low- Low to medium- Medium- Medium to high- HighIt only makes sense to compare them (to get meaningful results) to the following: - Private client portfolio index for that level of risk- Other portfolios within the same risk levelAgain, seek professional advice as there maybe other factors to consider or if your circ*mstances change.

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• Jack Ziegler III, CFP® Christian Family’s Financial Planner 🙏 Read Bio and see how…Be Radically Intentional 👊Accepting new clients: generous families/businesses

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  Benchmarks are helpful for review but what’s more helpful is using your goals as the main benchmark.Are we on track?Have our goals changed?Has our risk tolerance changed?Continue to align assets with values/goals, and it’s hard to go wrong.

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• Kaspars Kravinskis Development planning, economics, finance, education

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  Regular evaluation not only helps refine your strategy but also ensures alignment with ever-evolving market conditions and personal financial objectives. Embracing a self-directed approach, driven by the belief in individual autonomy and the ability to react to market cues, optimizes financial resilience. In an interconnected global economy, proactive individual decision-making and adaptation, in response to market shifts, collectively contribute to a more responsive and robust financial landscape.

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• Lee ChenYee (李珍仪） I help build multiple income streams so you can retire with freedom, flexibility and fulfilment | Chemistry Grad > Marketer > Wealth Management Consultant

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  I agree but would suggest a quarterly review, or at least half yearly. How does this regular review (aka portfolio rebalancing) works:1. Risk Management: It helps control risk by ensuring that your portfolio doesn’t become too heavily weighted in a single asset class.2. Return Optimization: By selling overperforming assets and buying underperforming ones, rebalancing can enhance your overall returns over time. Sell high, buy low! 3.Diversification: It ensures that your portfolio remains diversified, reducing exposure to the risk of individual assets or sectors.Rebalancing helps keep your investments in line with your long-term financial objectives, allowing you to stay on track despite short-term market fluctuations.

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• Taras Rybak Partner at Fusion Group ✧ Making independent financial advice better, more affordable and accessible to everyone

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  The investment strategy (or portfolio) must be adjusted regularly, as asset allocation will change over time. Also, the portfolio must be adjusted if your personal/financial circ*mstances change. Seek professional advice and talk to your adviser once a year to review your financial situation and investment strategy.

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• Glavis Loh I help young adults kickstart their lives | Tips and tools to navigate adulthood + build a career and life you love

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  Your investment plan can change, and it's good practice to adjust to keep things balanced.As you get closer to your goal or retirement, you might want to choose safer investments. Ramit Sethi (Author of I Will Teach You To Be Rich) has a good way of putting it:- Age 35: 90% stocks, 10% bonds- Age 45: 90% stocks, 10% bonds- Age 55: 69% stocks, 31% bonds- Age 65: 53% stocks, 47% bonds

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• Kemi Ojenike Family Wealth Advisory | Law | Communication | Social Impact | I help families identify, preserve and transfer their complete wealth across generations.

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  Your financial strategy should create room to take advantage of opportunities within your risk appetite. Again, the strategy of 10 years ago, may not be suitable for today's market. There may also be opportunities that no longer exist due to innovation and technology advancements. These changes must be borne in mind and expertly navigated. However, not every market downturn requires a change in strategy. Sometimes, the best option may be to maintain status quo.

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• Jackson Larimer Stressed about money? Free resources in my bio

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  A few simple strategies to avoid making emotional or impulsive decisions:1) Look at your investments less often2) Don't invest money you can't afford to lose3) Don't invest money you need in the near future4) Create rules such as stop-loss orders or limit sells to dictate your decisions

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• Emanuel Balsa I teach to make +10,000 smarter, from financial confusion to clarity ➕ Follow to use education as your first financial foundation

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  Voluntary or emergency changes happen..Emergencies happen, but you can be prepared:Set up an emergency fund - aim for 3-6 months of living expenses in a separate savings account.Review your risk tolerance - consider your age, goals, and time horizon. If you're close to needing money, reduce risk.Diversify and adjust - move some investments to more stable options like cash or bonds.Stay calm, don't panic - take a deep breath and evaluate your options before making any moves.Talk to your family - make sure everyone is informed and on board with the plan.

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• Taras Rybak Partner at Fusion Group ✧ Making independent financial advice better, more affordable and accessible to everyone

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  That is the most important thing as this is your financial health. You need to understand at least the basics of investing and financial planning, but professional advice is crucial. It's the same when it comes to health. You need to understand how your body works etc, but you must visit a professional to properly review your health especially when you need help.

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• Jackson Larimer Stressed about money? Free resources in my bio

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  Don't forget to account for the cost of hiring an advisor. Most financial advisors charge 1% of your portfolio value annually. Robo-advisors are a more affordable option at around 0.25%. You may even be able to do it yourself at a much lower cost, if you are willing to take the time to learn. This is where seeking professional advice can be really helpful.

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• Juan Pablo A. Ingeniero Comercial || Magíster en Economía Financiera || Docente Educación Superior || Asesor Económico Financiero

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  Es muy necesario, pues con el auge del uso de las redes sociales y medios de comunicación masiva como fuente de información (desinformación), surge la tendencia de confiar en rentabilidades (promesas) fuera de contexto y sustento, que han dado origen a múltiples casos de estafas (engaños) donde las personas por “x” motivo han confiado y perdido incluso los ahorros de su vida. Se necesita la labor de especialistas en el área para poder educar (primer gran desafío) y luego, orientar y canalizar a profesionales capacitados que puedan evaluar el perfil de riesgo de cada potencial inversionista y así presentarles las múltiples alternativas que entrega el mercado financiero que se adecúe a sus reales necesidades y posibilidades.

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• Erika de Faria Gusmão

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  Não acho interessante colocar “robo-advisor” como opção.Colocaria planejador financeiro e assessor de investimentos. Importante também citar que as pessoas precisam se dedicar a produzir o dinheiro. O especialista o auxiliará a trabalhar o dinheiro, para que ele renda melhor.

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• Rogério Camilo, CFP® Certificado Planejar CFP® | Especialista em Investimentos CEA | Alta Renda | Private | Assessor de Investimentos | Planejador Financeiro | Previdência | PAAP T13 | Gerente de Investimentos

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  Buscar aconselhamento profissional ao investir pode ser uma decisão sábia que pode levar a melhores resultados financeiros e maior tranquilidade. Embora haja custos associados (ou não, dependendendo se sua instituição financeira oferece esse profissional) a esse tipo de serviço, os benefícios a longo prazo geralmente superam esses custos, especialmente quando se considera o potencial de maximização de retornos e minimização de riscos. Mas lembre-se que o conhecimento é libertador, procure aprender sempre que possível sobre o assunto, sempre questione o profissional contratado, peça para que te explique o racional por trás das alocações e o como você pode ficar antenado nas notícias que podem impactar seus investimentos.

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• Taras Rybak Partner at Fusion Group ✧ Making independent financial advice better, more affordable and accessible to everyone

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  Don't underestimate the value of professional financial advice. Many "financial gurus" on social media only focus on fees and talk a lot about cheap index funds. Fees are only one element to consider. You need to take into consideration your overall financial situation, tax implications and different financial goals. You need to learn to understand how investing works, but a financial adviser would help you to create a holistic financial plan and provide you with a number of options to implement it.

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  There are THREE important points that was NOT mention and it is ofter underrated! #1. Invest in yourself first: as you should already know that pays the highest dividends. If you don’t know what you are doing, you are just gambling. Learn how to invest by reading books, paid courses and coaching/mentoring to accelerate the progress and process. Investing is a skillset that anyone can learn and should be learned before you put your hard earned money in dangerous. #2. Join a community of like-minded investors: if you want to go far and fast, go together! Individuals who are eager to learn how to fish and not getting the fish every time, will be able to gain the biggest reward. Remember that, no one cares about your money more than YOU!

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• Kaspars Kravinskis Development planning, economics, finance, education

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  Here's a story. Consider some young investors during a tech boom. Despite limited resources, they spread their investments across several promising startups. When a market downturn occurred, some of their investments suffered, but thanks to diversification, not all was lost. Their proactive monitoring and adaptability highlight the importance of individual decision-making and responsiveness in navigating unpredictable markets.

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  While diversification is a cornerstone principle in investment, aiming to spread and mitigate risk, it's essential to recognize it's not a one-size-fits-all strategy. Here are two compelling points from my pov:1. Diminishing returns: There's a threshold beyond which adding more assets to your portfolio doesn't necessarily enhance your returns but might lead to mediocrity. A concentrated portfolio, where each asset is chosen with intense scrutiny, might sometimes outperform a diversified one.2. Dilution of Expertise: Investing across a wide range of assets could lead us to venture into unfamiliar territories. There's something to be said for investing with conviction in areas where our knowledge and expertise are strongest.

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• Jackson Larimer Stressed about money? Free resources in my bio

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  Rather than hiring a financial advisor, you may want to consider an alternative option. Learning how to manage your investments yourself can give you greater flexibility and control over your own money. It can also help guarantee that the person managing your money is acting in your best interest, because that person is YOU!If you want to manage your own investments but aren't sure where to start, consider reaching out to someone who charges a flat rate to teach you how to invest.

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