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Do I Need a Financial Goal to Start Investing?
Your 2-Minute dose of Genius!
Sika Republic
October 31, 2023
One question new investors often ask is: Do I need a financial goal to start investing? The answer is not as simple as “yes” or “no,” but having one can certainly benefit you in the long run.
A “financial goal” is simply defining what you want to achieve financially, such as saving for a deposit on a house, achieving financial independence, or building your wealth over time. A financial goal gives you a target to aim for and work towards.
However, it is not a requirement to start investing.
Investing without a financial goal may seem aimless at first, but it is still a wise decision in the long run. By investing your money early on, you’ll give it more time to grow through compound interest, which is when the interest earned on an investment is reinvested, leading to a snowball effect over time. So, the earlier you start investing, the more time your money has to grow.
Having a financial goal can help you invest more deliberately and with purpose.
Gives You a Sense of Purpose
Investing with a financial goal in mind is a reminder that you're not investing just for the sake of it, or chasing the hottest stocks, but working towards something meaningful. This mindset can help keep you motivated and give you a sense of direction as you work towards your milestones.
Keeps Your Nerves in Check
Investing can be unpredictable and volatile, with emotions that can lead to impulsive investing decisions. Having clear financial goals can help you make steady choices in the face of the inevitable market ups and downs.
Guides Your Investment Strategy
Your financial objectives will guide your decisions, such as the type of investment you choose and the level of risk you're willing to take. So, if your financial goal is to save for a deposit on a house, your approach to investing will differ from someone who wants to build wealth for retirement.
Puts You in Control
If you don't have an investment target, how will you know if your investments are performing as you'd like them to? Your financial goals help you measure your investment performance, so you can tell whether you're on track to achieving your investment objectives or need to re-think your strategy.
Today’s Takeaway:
While you don't need a specific financial goal in mind to start investing, doing so without a sense of direction is like cooking without a recipe. Chances are, you'll wind up with something edible but not particularly satisfying. So even if you're starting small, having a financial goal in mind will make it easier to stick to that commitment and get you on a good track for long-term growth.