Setting investment goals for 2022

Solutions to help you meet your New Year’s investment goals

Setting investment goals for 2022

Setting investment goals for 2022


Creating and maintaining the right investment strategy is key in securing your future financial goals and objectives. A significant element of this strategy is your level of involvement. How much control do you want over your investments? Do you prefer to be in charge, or do you want someone to invest for you?

Volatile markets can test even the bravest of investors, and we can offer solutions to help meet your goals, whilst weathering the markets by keeping your portfolio diverse. So, what do you need to consider?



The first question you should ask yourself when setting investment goals is “what is my time horizon?’ In other words, when will you need to access the portfolio? Are you investing for your young child’s school or university education, or for your retirement thirty years from now? Or is the goal much shorter in timescale, say buying a property in three years or starting a business in five? The timescale for any particular financial goal will have a significant bearing on the type of investments utilised to achieve it.

The general rule is the longer your time horizon, the riskier (and potentially more lucrative) investments you can make. The logic to this being that the more extended a timescale is the more opportunity you have to ‘ride-out’ investment fluctuations and market cycles. Conversely, if your timescale is much shorter, consideration of investments which offer more reassurance, but lower returns, may be appropriate, the reason being a shorter time frame will not offer enough scope to recoup investment losses.


Investment Risk

Another element to consider is your individual investment risk profile. How comfortable are you with the possibility of investment losses, or seeing fluctuations in the value? Some investors will forgo the opportunity of making a large gain if they know there is also the possibility of significant losses (‘risk averse’). Others, ‘risk seekers’, are willing to roll the dice on a large loss if there is also the chance to make substantial gains.

It is not always easy to determine where one sits on the spectrum of risk-aversion to risk-seeker, but it is important to try and obtain an accurate assessment. Risk-aversion is not an either-or proposition, with many investors considering themselves risk-seekers until they experience a real-life loss.

Before making any investment, you should try to gauge exactly what circumstances might cause you to sell an investment if it began to experience losses. As Mike Tyson said, “everyone has a game plan until they get punched in the face”, so it is important to stick with your long-term plan despite adverse events and having an accurate sense of your true risk tolerance will help develop a plan you can stick with.

It is worth bearing in mind that, as above, your timescale can impact your approach and attitude to risk. For example, if you are investing for retirement in thirty years, you may be more willing to face greater risk in exchange for higher returns than if you are saving to assist your child’s university costs in four years.


Liquidity Needs

Another question you should ask when setting your investment goals is, ‘what are my liquidity needs?’ Liquidity referring to how quickly an investment can be converted into cash (or the equivalent of cash). Property, for example, tends to lack liquidity as it can take a long time to sell residential or commercial property. Publicly traded stock, on the other hand, tends to be relatively liquid, though losses may be suffered if cashed-in when markets are down. Cash and cash equivalents are the most liquid form of investment.

Liquidity requirements will affect the types of investments you might choose to help meet your goals.

For example, if you do not have short-term liquidity needs you can probably afford to invest in less liquid assets where the potential for gains is potentially higher. However, if school costs are forthcoming, it is unlikely you would want to be 100% invested in less liquid assets. Like your risk tolerance, liquidity needs are related to your time horizon.

When considering liquidity, it is important to look at your overall needs and not just those specific to a given financial goal. If you have a stable income, strong employment prospects, and an emergency cash reserve with no imminent financial obligations, you may have fewer liquidity concerns than someone with a young family, no emergency funds, and employed in an industry experiencing layoffs.


Investment Goals

Once you have determined your financial goals and how your timescale, attitude to risk and liquidity needs affect them, it is time to consider how your investments might help you achieve those goals. When considering any investment, you will need to think about what it offers in terms of three key investment goals:

Growth: in investing terms, growth (also known as ‘capital appreciation’) is an increase in the value of an investment; in other words, you can sell it for more than it originally cost. Capital is the money you initially put into the investment.

Income: some investments make periodic payments of interest or dividends. Those payments represent investment income, which can be spent or reinvested. For retirees, income is a key investment goal, but it can be important for other reasons as well. For example, income payments can help offset the impact of the ups and downs of a growth-oriented investment.

Stability: this is sometimes known as ‘capital preservation’ or ‘protection of principal’. An investment that focuses on stability concentrates less on increasing the value of that investment and more on trying to ensure that it does not lose value. If you plan to spend a certain amount soon and want to make sure the capital is there when you need it, stability might be your primary investment goal.

With each individual investment, there is a relationship between growth, income, and stability. The more an investment offers in one area, the more you may have to trade off in terms of the other two. The key to setting investment goals is to tailor each investment to do what you want it to for you.

You may choose to have one single investment goal for a given financial objective as in the example of making stability a priority for short-term money. Or you may prefer to combine several investments to achieve a balance of stability, income, and growth in the hope of maximising your overall returns at a level of risk that you are comfortable with and that matches your financial goal(s).

Be clear about what you are investing for. Putting all your capital into one type of investment can be an incredibly risky strategy. You can reduce that concentration risk by spreading capital across a mix of asset types and geographies. Different investments are impacted by different factors: economic, monetary, politics, conflicts, even the weather! What is positive for one investment can be negative for another, meaning as one rises the other falls.

It is important to regularly review your investments, ensuring they are still on track to meet your goals and objectives. When you start investing for the first time, or even if you are time-hardened and sophisticated investor, one of the key weapons in your arsenal is diversification. Whether the market is bullish or bearish, maintain a diversified portfolio is essential to any long-term strategy.

Diversification allows you to spread risk among different kinds of investments to potentially improve returns, in turn reducing the risk of the overall portfolio under-performing or losing value.

With some careful investment planning and an understanding of how various asset classes work together, a properly diversified portfolio provides an effective tool for reducing risk and volatility without necessarily giving up returns.


Vision, a long-term commitment, and the help of professional experts

Achieving your investment goals does not happen by chance. It needs vision, a long-term commitment, and the help of professional experts to establish and maintain your strategy. Investors are facing unprecedented challenges in today’s global markets. Finding answers can be hard. We can help you to meet your investment challenges – please contact us for more information.




This information has been prepared using all reasonable care.  It is not guaranteed as to its accuracy, and it is published solely for information purposes.  It is not to be construed as a solicitation or offer to buy or sell securities and does not in any way constitute investment advice.

Information based on our current understanding of taxation legislation and regulations.  Any levels and bases of, and reliefs from, taxation are subject to change.

The value of investments and income from them may go down.  You may not get back the original amount invested.

Past performance is not a reliable indicator of future performance.

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