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Financial Planning

Six steps to achieve your investment goals

Lynn Bolin, Head of Communications at Prudential Investment Managers

Investing is the foundation of a healthy financial life. Although we understand this intellectually, many of us struggle practically when it comes to putting money aside for that special something. Here are some useful tips to help you define your investment goals and to put strategies in place to achieve them.  

1 – Clarify your objective

The first step is being clear on your investment goals. There are some common financial objectives that most people strive towards, such as being able to retire from work with enough money to cover their living costs, buying a home, or being able to provide their children with the best possible education. Then there are smaller goals, such as investing towards a new car, an overseas holiday, or even a new laptop. Regardless of the goal, it’s important to define what it is from the outset and to identify how much you’ll need to achieve it. Prudential’s Goal Calculator is a useful tool to help you find out just how much you’ll need to invest (whether monthly, as a lump sum, or both) in order to reach your goal within your specified time frame.

2 – Consider your time frame

How many months or years do you have before you would like to achieve your goal? It’s important that your time frame be realistic, based on the amount that you have at your disposal to invest and the financial cost of your goal. If the investment amount that you’ll need to contribute is unachievable, you essentially have two options: scale down your goal or extend your investment time frame.

3 – Plan your steps

Once you’ve settled on a goal, a time frame, and the corresponding investment amount, it’s time to plan how you’ll achieve it. In most cases, you’ll need to adjust your other monthly expenses in order to free up some money for investing. If you don’t already have a monthly budget, you will need to draw one up. If you do have a budget, take some time to review it and look for ways to save. Lifestyle expenses such as ready-made meals, clothing, gifts, and entertainment, are usually the best place to start (cut back on these to save). Whatever you do, do not be tempted to cut back on important ‘grudge’ expenses though, such as insurance and medical aid.

4 – Decide on which fund to invest in

Now that you have an idea of how much you’ll need to invest to reach your goal, and you’ve restructured your budget to free up some extra cash, the next step is to decide where to invest your money. The answer to this depends very much on your risk profile and time frame. If you are investing towards a long-term goal, such as retirement, and you have a high tolerance for risk, you may want to consider increasing your equity exposure within your investment, while still complying with the asset allocation limits outlined in Regulation 28 of the Pension Funds Act. Alternatively, for shorter-term goals with less risk, interest-bearing funds may be a more appropriate option.

5 – Make it automatic

Assuming that you’re able to free up some extra cash to put aside every month, and you know where you’d like to invest it, the best thing you can do is automate the process. Set up a monthly debit order to make your savings automatic so that this process isn’t influenced by external factors, such as emotions or impulse purchases. The good news is that you generally need as little as R500 per month to invest and it could even be a quick online process to get started.   

6 – Track your progress

It’s good practice – and can be very motivating – to check in and measure your progress regularly to make sure that you’re still on track. However, it’s important to remember that if you are invested in the stock market (equities), your total investment amount will fluctuate depending on market ups and downs. This volatility is generally smoothed out over time, so don’t panic and change tack when the market is down, as this can permanently lock in losses. Consistency and a calm temperament are the keys to long-term success. 

For more information, contact Prudential’s Client Services Team on 0860 105 775 or email query@prudential.co.za.







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