Goals - whether short or long term - form the foundations of your everyday life as well as your financial plan. Whether saving for a new car, holiday, your retirement or your child's education, you need to ensure that your goals and life needs are aligned with your investment and savings strategy.
Taking a goal-based investment approach from the onset can help with this alignment. We are currently experiencing times of extreme volatility. Covid-19 has had a dramatic impact on markets all over the globe. This is not the first time the world is experiencing such volatility. Below is a graph of other such events and how the market reacted in the months and years that followed:
Source: Timbukone
As seen above, the Global Financial Crisis of 2008 saw a similar fall in markets. The market recovered post 2008 and moved steadily upward from 2009 onwards. Similar corrections were seen after the Tech bubble burst, the Asian Financial Crisis and Black Monday.
Thus, during times of economic uncertainty, sticking to your investment goals is key as this allows enough time for markets to correct following downturns or bouts of volatility. Sticking to the investment goals you have set is also important in achieving sustainable investment returns. Like in 2008, there are presently opportunities available to purchase financial assets at decreased prices, allowing returns on investments to increase going forward. Investing and saving consistently will help you take advantage of this.
Choosing investment vehicles according to your goals not only helps keep you on the right path, but also allows your strategy to play out as it should as your investment is allowed enough time to prove itself.
Setting a proper goal and strategy is important and therefore before saving or investing we need to ask ourselves the following questions:
Source: behavoirgap.com
Building an investment strategy is a long-term process and is dependent on your specific life stage. Investing and saving should be a priority for everyone and is an ongoing process as investment opportunities continuously present themselves. It is never too late to start working on your investment goals - to close the gap between your current reality and your goal.
