Virtually all clients who work with us at Thorley Wealth Management to develop investment portfolios have three common objectives. In simple terms, they want to make money, not lose their principal, and not pay an undue amount of taxes.
But the planning process should begin with one key question: What does the client want the money to accomplish? As advisors, we can bring our experience to bear as coaches in the process, but the final goal-setting decisions rest with the client. Solid goals then help suggest the appropriate investment strategies needed to meet them.
The acronym SMART offers five important attributes of strong goals for one’s portfolio. The objectives should be Specific, Measurable, Attainable, Realistic, and Time-Bound.
It’s impossible to overstate the importance of the first attribute – specificity. The more specific the goal, the better the chance to achieve it. For instance, a general goal might be to save money for a child’s college education. But are you considering a four-year private school, a four-year public school, or something else? And will the child be expected to contribute to tuition payments, or will the portfolio be expected to cover it all?
I think you’ll agree that adding specificity to a goal makes it easier to measure – to eventually determine whether or not it has been accomplished. You can go a long way to setting measurable goals if you actually write them down on paper. By this action you almost acknowledge to yourself that this goal is an important commitment, one that you need to stand by over the years.
In our next blog, we’ll cover the A. R. and T. part of a SMART goal.