Home' Trinidad and Tobago Guardian : March 1st 2015 Contents SBG12 PERSONAL FINANCE
SUNDAY BUSINESS GUARDIAN www.guardian.co.tt MARCH 1 • 2015
Aproper strategy is required
to ensure that the goals you
set are met. Whether the
targets are to pay bills or to
go on vacation, a carefully,
well laid-out plan can assure
success. So when it comes to your finances
a strategy map secures your goals.
You may have short-term goals you hope
to achieve within a few years and long-term
goals for the distant future. For example, you
may be saving for the down payment on a
home or perhaps you want to provide university
education for your children. Maybe your goals
are even longer term and you're building a
nest egg for retirement or planning to get
married. Whether you are kick starting your
investment or already a seasoned investor,
setting goals are the foundation upon which
long term wealth is built. In order to reach
your goals, you need to determine their prac-
ticality and outline each goal's investment
Time is important because the longer you
have to achieve a goal, the more aggressive
you can be in your investment choices. Con-
versely, when you have less time to achieve
a goal, it is more prudent to consider lower
That is why the mnemonic SMART is a
useful way to ensure that the goals you select
are motivating and more likely to be achieved.
SMART goals are:
Specific: Proclaiming that you want to buy
a car is not enough, you must do the necessary
homework to find out the price of a new car
versus a foreign used or locally used car and
which makes better economic sense to pur-
chase in line with your budget.
Measurable: Measurable goals can go a
long way in refining what exactly it is you
want. Decide how much you need to put
aside every month to purchase your car and
how long it will take to accumulate the full
sum, so that you can trace your progress in
reaching your target. Defining the physical
manifestations of your goal or objective makes
it clearer and easier to reach.
Attainable: You weigh the effort, time and
other costs your goal will take against your
other obligations and priorities. Is the car that
you would like to have attainable, given your
income and expenses?
Realistic: The goal has to be realistic and
related to what's happening in your real life.
Can you afford a luxury sedan when your
salary screams frugality?
Time Bound: Every goal must have an
accompanying timeline. Timelines can be cat-
egorised in short (0-one year), medium (one
to three years), and long term (three or more
The SMART methodology gives your goals
form and shape with clear cut steps on how
to make your aspirations a reality.
After establishing your goals, the next step
is to determine what your current financial
picture looks like.
To see through the maze, the easiest way
is to start a budget which is the bedrock upon
which lies your investment strategy. It could
mean simply allocating your income between
savings and different categories of expenditure
and debt repayment. Establishing and sticking
to a budget leads to financial discipline and
helps you to understand how much cash flow
is available each month for investment and
savings. It is a rule of thumb that establishing
a regular monthly savings plan is recommended
over one-time lump sum investments to reduce
stress on cash flow.
With 2015 now in first gear, investors need
to consider adjusting their investments in
order to keep to the desired allocation between
stocks, bonds and cash. While it is difficult
for investors to forecast market moves, investors
should spread their eggs among many baskets
and remember that drastically altering their
portfolio too often can bring negative results.
For any investor, the key to investing is
ensuring that your portfolio is well diversified
and one avenue is through a mutual fund,
which typically involves building a diversified
portfolio of stocks, bonds and cash or short-
Such asset class diversification allows
investors to limit their risks by reducing the
effect of a possible decline in the value of any
asset class or security in the portfolio. So, if
one asset class or security underperforms the
others can offset the impact.
By having a well-diversified portfolio with
a mix of these asset classes, you can participate
in the gains of the best-performing assets
while being cushioned from declines in others.
Remember that the asset allocation that works
best for you at any given point in your life
will depend largely on your time horizon and
your ability to tolerate risk.
Mutual funds dig a bit deeper than simple
bank savings because its earnings potential
carves a route to achieving one's goals.
Once you have determined what type of
investor you are and what your ideal asset mix
should be, you should re-visit your financial
goals and investment strategy required to meet
those goals. Developing SMART goals will
channel your strategies in terms of time line
and what fund is best in meeting a specific
The path to goal setting and investing suc-
cess takes time, serious study, disciplined effort
and most importantly, patience.
UTC portfolio managers can help investors
enhance the performance of their investment
portfolio and to identify ways for them to
continue saving effectively and generating
By setting sharp, clearly defined investing
goals, you can measure and take pride in the
achievement of those goals, and you'll see for-
ward progress in what might previously have
seemed a long, pointless grind.
Unit Trust Corporation
Map your investment strategy
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