The A, R, and T of an Investment Portfolio SMART Goal

A successful investment portfolio begins with SMART goals – objectives that are Specific, Measurable, Attainable, Realistic, and Time-Bound.

Our last blog noted that the more specific the goal, the easier it is to measure whether it has been achieved.

Specificity is a highly important factor in sound portfolio goals, but those goals would have little chance of being accomplished if they were not also attainable and realistic.   These latter two attributes go hand-in-hand and must be acknowledged at the outset of the goal-setting process. 

As advisors with a clear and objective view of a client’s financial situation, we can help determine if a goal is attainable and realistic for them.  Most people do not have unlimited resources.  We need to set parameters based on the funds a well-managed portfolio can realistically be expected to generate for them in a given period of time.   This often means setting priorities -- choosing which specific goals are the most important and which, though desirable, can be assigned a slightly lower priority.  By adjusting our goals based on how realistic they are to achieve, we can greatly increase the likelihood that they will be attained.

The final letter in the SMART acronym stands for Time-bound, and it’s imperative that this attribute not be overlooked.   For some goals, such as funding a college education, the “deadline” is fairly obvious.  The funds must be on hand at the time the student is ready to go to college.

Other goals, however, may have a less obvious time frame.  For example, some people may not have a specific retirement date in mind, but intend to work as long as they are able.  But an advisor may ask the client how long he or she will need to work.  Planning to meet that given date would provide flexibility, giving the client the option to continue working or to retire.

In fact, ensuring that your goals are appropriately time-bound helps in determining their realistic attainability.