Bridging the gap: Effective goal setting and investment planning

To achieve effective investing and financial planning, it is crucial to understand your financial goals and identify the gaps that may hinder your progress. Let us find out how you can set clear objectives and pinpoint potential obstacles on your journey to financial stability.

What are investment goals?

Investment goals are specific financial objectives that you aim to achieve through investments. These might include:

• Purchasing a home
• Funding your children’s tertiary education
• Planning for retirement

Having clear goals provides clarity and purpose to your investment strategies and financial decisions. Some key benefits include:

• Setting a clear destination for your financial journey
• Establishing an appropriate time frame for your investments
• Guiding your decisions when it comes to risk tolerance and asset allocation

These goals are the "why" behind your investment strategies, helping you stay focused and motivated.

What are investment gaps?

Investment gaps refer to the difference between your current financial position and where you need to be to achieve your goals. These shortfalls in your investment portfolio can arise from several factors, such as:

• Inadequate savings
• Lack of portfolio diversification
• Poor investment choices
• Unrealistic or misaligned expectations

Identifying these gaps is crucial for developing an effective financial plan.

Setting clear investment goals

To develop an effective financial plan, start by setting clear goals. Consider asking yourself important questions, like:

• How much will I need for my children's education?
• What kind of lifestyle do I hope to enjoy for retirement?
• What would be a comfortable monthly budget for my later years?

Remember that different goals may require different investment strategies, asset allocations and time frames.

For instance, building wealth for retirement might allow for a long-term approach that includes both lower- and higher-risk investments, while saving for a child's education might require a more conservative strategy over a shorter time frame.

Identifying investment gaps

Once you have set your goals, the next step is to identify potential gaps that could hinder your progress. Here are some ways to identify those gaps.

First, assess your current financial position.

• Are you on track to meet your goals, or are there any shortfalls?
• For example, if your goal is to retire with SGD1,000,000, calculate whether your current savings rate and investment returns will allow you to reach that amount by your target retirement age.
• Also, consider paying down any liabilities, such as your housing loan.

Second, assess the performance of your investment portfolio periodically.

• Review how your current investments are performing relative to your goals.
• Determine if your portfolio is built to weather short-term volatility to meet your long-term financial objectives.
• Assess whether your investments are sufficiently diversified or too concentrated in one area, which could increase vulnerability to short-term fluctuations.
• Evaluate whether your portfolio needs rebalancing to keep you on track towards your goals.
• Assess your comfort level with the risks involved in your investments.

Sometimes, evaluating investment returns can help manage expectations and redefine goals.

Third, assess your spending behavior. Gaps often arise not from poor investments, but from spending habits or insufficient savings.

• Regularly review your budget to ensure you are saving enough to meet your investment goals.
• Adjust your budget based on any changes in your income.

Bridging the gap

Understanding your current investment goals and identifying potential gaps will keep you well-positioned to make informed financial decisions. As your life circumstances change, so might your goals and the investment strategies needed to achieve them. That is why it is important to regularly review and adjust your investment portfolio to ensure you are consistently progressing towards your financial goals.

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This publication shall not be regarded as an offer, recommendation, solicitation or advice to buy or sell any investment product and shall not be transmitted, disclosed, copied or relied upon by any person for whatever purpose. Any description of investment products is qualified in its entirety by the terms and conditions of the investment product and if applicable, the prospectus or constituting document of the investment product. Nothing in this document constitutes accounting, legal, regulatory, tax, financial or other advice. If in doubt, you should consult your own professional advisers about issues discussed herein.

The information contained in this publication, including any data, projections and underlying assumptions, are based on certain assumptions, management forecasts and analysis of known information and reflects prevailing conditions as of the date of the article, all of which are subject to change at any time without notice. Although every reasonable care has been taken to ensure the accuracy and objectivity of the information contained in this publication, United Overseas Bank Limited (“UOB”) and its employees make no representation or warranty of any kind, express, implied or statutory, and shall not be responsible or liable for its completeness or accuracy. As such, UOB and its employees accept no liability for any error, inaccuracy, omission or any consequence or any loss/damage howsoever suffered by any person, arising from any reliance by any person on the views expressed or information in this publication.