PRISM: Prioritizing Your Goals

Investing can seem daunting, especially for beginners, but setting clear financial goals is the first step to building a solid strategy. Omar Beirat's article, A Beginner's Guide to Goal-Based Investing, highlights the importance of tailoring investment strategies to fit your unique goals, time horizons, and risk tolerance at different life stages. 

From aggressive growth strategies for young professionals to balanced approaches for mid-career individuals and income-focused portfolios for those nearing retirement, the article emphasizes the value of diversification, flexibility, and periodic review to adapt to life changes and market shifts.

A key takeaway is how aligning your strategy with your goals-whether short, intermediate, or long-term-ensures your investments are working towards what matters most to you.

How do you currently set and prioritize your investing goals, and what adjustments have you made as your life circumstances or financial needs have changed?

#1 Omar, you did a decent job explaining the FLOW of PLANNING CHANGES over time.

#2 The message needs to be "punched up." It just lays there. It is very low on "motivation to act." Adding motivational value will take more effort.

      I add these thoughts to help expand the skill set and to zoom in on making key concepts more specific.

#3 AAII has published this article several times. Every concept presented in the article is bedrock financial industry catechism. You can get the same advice anywhere free ... or pay for it ... or ignore it ... and really pay for it.  

#4 As John L's comment on the article suggests, EXAMPLES would be more instructive on how the major concepts in the PRISM Wealth Building Process interact.

#5 Add some realistic dollar amounts,

#6 Add some historical percentage rates of return, and

#7 An introduction to / review of some simple TOOLS To ESTIMATING RETURNS

      (compounding and

      the Rule of 72's) and

#8 TOOLS to ESTIMATE "Risk" aka VOLITILITY 

     (basic probabilities and

     Venn diagrams) would not be over anyone's head.

    If it is, you have a big clue as to where your audience is on their learning curves for the skills needed. If they are behind the curve, then this is a good time for them to realize the magnitude of the gaps in their educational deficiencies and SET GOALS NOW on what to do to remediate any deficiencies. AAII provides several hundred articles on all aspects of investing.

#9 Everyone wants the same things out of life more or less. It's the WORKING TO "GET them" part that takes education, effort, and discipline. 

#10 Investing never gets easier.

     The tools mentioned below add granularity and specificity to the Disneyesque "wish lists" I see posted on the AAII Community and are instructive about the LEVEL OF COMPETITION all investors can expect when striving to achieve their goals in competition with millions of other people with advanced skills, accumulated experience, and expansive resources.

#11 Write down your plans.

#12 Set specific timelines.

#13 ALL timeline completion dates expand forward, i. e., it may take longer than you forecasted.

#14 Realistically cost plans out. It is better to overestimate the costs. This helps you know the cash burn rates you need to cover through working and savings.

#15 Inflation will be your biggest enemy.

        Always discount future cash flows by the rate of inflation.

         Plan to face 3% annual inflation rates in the future. I

#16 Measure accomplishments numerically. USE ALL NUMERICAL feedback you get to learn how to IMPROVE.

#17 The priority of goals may change.

#18 A quick reminder of the essential character-building skills might help new investors look deeper into their souls and psyches and take inventory of their capabilities.

#19 Investing is never as simple as it sounds. It takes CHARACTER (all of the above skills + discipline, patience, etc.) to handle frequent disappointments.

#20 NOT achieving goals, plans, and results are part of the process.

#21 Remember, independent investors are amateurs. We have to make FEWER forced errors than the pros do. That's how THEY win. We let them force us to make mistakes they never make.

#22 An AAII lifetime membership will pay for itself many times over.

        Read the articles.

        Use the screens.

        Learn from member comments.

       "Never, never, never give up.”  

Regards,

------------------------------
BARRY JOHNSON
------------------------------

About 100 years ago (on May 16, 1924), Walter Shewhart, an engineer at a Bell Telephone plant in Illinois invented a process to improve performance known as the Shewhart cycle. This simple process is widely used in industry, business, and education across the world. For this, he is referred to as "the grandfather of statistical quality control."

You do not have to become a statistical process control (SPC) maven to benefit from the Shewhart cycle. It's a simple 4-step process

"PDCA" -- Plan, Do, Check, Act (the industry version) -- or

"PDSA" Plan, Do, Study, Act (the educational version.)

Wikipedia provides a good enough introduction to get you started.

Knowing how to USE and APPLY PDCA to your investment learning cycles will give you a PROFESSIONAL GRADE analysis tool that greatly enhances your ability to IMPROVE your investing processes SYSTEMATICALLY and improve the results you get. 

Basic PDCA rules are:

#1 Every process produces exactly the results it is designed to produce.

#2 If you are NOT getting the desired results, you need to redesign the process.

#3 Use the data the process makes to improve the process systematically. From there, the choice of statistical tools to put in your toolbox is up to you.

Regards,

I'm sorry, but I think the referenced article gives bad, BAD advice to young investors. By any measure, I have been a "successful" investor, yet the factors listed in the article as "crucial" never had any impact whatsoever on my investment decisions. Even worse, the article distracts young investors from the one goal that investing can best achieve: the long-term accumulation of wealth.

"Risk tolerance" is a prime example of a useless factor for investment consideration. I have no idea what "risk tolerance" even means. It's one of those catchphrases slimy investment advisors use to sound intelligent to their sucker clients. It gives those advisors an opportunity to misdirect the hapless client into a fixed-income vehicle that pays well---to the advisor, not to the client. 

Instead of "getting in touch with their feelings" to assess the meaningless concept of risk tolerance, a young investor would be better instructed and encouraged to stand strong in the face of volatility (that's what the "experts" really mean when they talk about risk) and stay the course with good long-term equity investments. In fact, volatility is something to be embraced by an intelligent investor, since it provides opportunities to buy good assets on the cheap. 

Setting multiple goals is also unnecessary. Throughout adulthood, my single objective in investing has been to grow my wealth as efficiently and effectively as possible while enjoying life in the process. I am now 63 years old, having retired "early" about 12 years ago, and nothing has changed about my objective. My "life circumstances," "different life stages," and other goals in life have done nothing to distract me from my sole investing objective. I've never tailored my "investing strategies to different goals, time horizons [or] risk tolerance levels." 

My lifelong asset allocation has been 100% in equities, and I will almost certainly retain that allocation until I assume room temperature. I own stocks that have been in my portfolio for decades, and I will likely still own them when I kick the bucket. 

I realize not everyone thinks like I do, but here is food for thought: By focusing on long-term asset growth, whenever I've had a spending goal, such as a down payment on a house, funding the children's education, buying a car, or whatever, the money was there when I needed it. I'm generally frugal in spending money, but the increasing snowball of wealth has provided increasing levels of funds available for expenditures. 

My approach vitiates the need to constantly adjust my asset allocation, churn my portfolio, or "adapt to market shifts" (whatever that means). I believe that in the investment world, simpler is usually better. The complex analysis presented in the referenced article is not necessary.