How to identify your investment strategy and goals


ANY LISTED company has a strategy outlining where that company wants to go, and how and when it is planning to achieve this. The same can be said about an investor looking to achieve long-term financial success.

As an investor and saver, you should know where you want to go (identify your goals), how you are going to achieve this (investment and savings strategy), and the time frame associated with those investment and savings goals.

Having a set plan in place can help you stick to your strategy, stay the course during periods of uncertainty, and ultimately reach your long-term goals within the desired time frame. The steps below will assist in defining and sticking to a winning investment strategy:


1. Define your retirement goals
The first step would naturally be setting your retirement goal. What is it you are wanting to achieve in your retirement journey? Where are you wanting to go?

2. Define a retirement strategy
How are you going to achieve this? What amount do you need to put away each month, and into which savings and investment vehicles?

This step will require you to consider your monthly cash flow. Comb through your bank statement and identify what items you don’t need on a monthly basis. Draw up a small cash budget, reduce non-essential expenses, and leave yourself a set budget for entertainment purposes.

3. Build an element of emergency savings into your budget
One thing this pandemic has taught us is the importance of having accessible emergency savings put away. Having three months’ salary set aside will mean not having to withdraw investments early in case of an emergency, and allowing your goal-based strategy to play out.

4. Reduce short term debt
Short term debt like credit card expenses should be eliminated as soon as possible, as the high-interest rates eat into monthly budgets which can be set aside for saving and investing.

Look at ways to eliminate debt exposure by eliminating short term expensive debt first. In the long run, this will mean more funds to put away into savings and investments.

5. Find the correct savings and investment vehicles that suit your goals
This will require some reading and research. Never be afraid to ask for help. Asking questions expands your knowledge, and no one is going to know your goals better than you do.

6. Set up automatic monthly contributions to your savings and investment accounts
These amounts are calculated when drawing up the budget in steps 2 and 3.

7. Allow your money to grow over the time frame set from the start.
Do not jump in and out of long-term investments and savings. This will increase the fees paid and not allow your money to work over the long term and achieve long-term investment and savings yields.

The last step will allow compounding to take place. Compounding leads to increased returns over the long term as a result of profits and returns being re-invested. By not withdrawing money from your investment, the capital base grows. Returns and profits are higher from a larger capital base, making your goals achievable in a shorter period.

Regardless of your goal, reaching it means aligning a strategy to the objectives of the investment. Once a goal and strategy are defined, selecting the correct investments becomes easier to do.

Whether your goal is 5 or 50 years away, identifying the destination is the first step needed on your investment journey.

Nicholas Riemer is head of investment education at FNB Wealth and Investments.