Page 42 - Workbook3E

Shifts in economic growth and interest rates and fluctuations in financial markets are normal parts of our nation’s business and economic cycles.
Shifts and fluctuations have happened before, and they’ll happen again. New or disruptive economic events, like sudden shifts in the financial
market, often receive considerable media attention. Long-term success stories, however, seldom receive the same coverage. Don’t be fooled by spin-doctors or investment gurus. If the media is reporting it, it’s too late to take action. Both, journalists and experts report historical events not future developments.
Develop a Long-Term Investment Plan
Throughout this Series, you’ve been reminded, ‘To fail to plan...
is to plan to fail.’ This same reminder applies to investment goals and strategies. Haphazard or poorly conceived investments bring frustration and financial ruin. Years of budgeting, saving, and self-sacrifice, with your personal finances can be overturned by a careless investment. To avoid such a disastrous probability, and to help your planning, follow these three steps:
1 Define your Investment Objectives
Everyone’s financial needs are different. Yours are no exception. Define your investment goals and strategies by asking yourself two questions about your needs:
a. What do you want from your investment? When young you may want investments to satisfy several goals: an education, a home, or a business of your own. If you’re older, you may be looking toward your child’s education, or retirement and its special cash flow needs. The goals you define are as varied as the financial markets available. You should clearly identify appropriate goals—for the short-term and for the long-term—so all your wants and needs are satisfied. You may want to refer to your “Most Important Things” list in Workbook 1.
RULE:
“I’m not only stashing away for the winter... I’m investing in a broad portfolio to diversify my futures.”
“Investment must be rational. If you can’t understand it, don’t do it.”
~ Warren Buffet
38 Workbook 3: Prepare for the Future
b. What is your time horizon? When will you need the money your investment capital earns? Will you need it within ten, twenty, or fifty years?