The best tips for financial planning and investment will vary depending on an individual’s personal goals, lifestyle, career, and age. Some people will choose to invest more aggressively, and others will be more cautious about preventing losses rather than maximizing gains. When determining different strategies for financial planning and investment, it’s best to consider personal savings goals, target retirement age, and the length of time of each investment.
Setting personal savings goals for things such as retirement, a child’s college education, or a house or car down payment can help individuals begin their own financial planning and develop investment techniques. Each person’s savings plan will be different, and it will depend on a variety of individual factors, including income, the amount needed, and the time frame for saving. Balancing short term goals, such as purchasing a new car, with long term goals, such as retirement, is also an important decision.
Long-term goals usually favor more aggressive investing when an individual is younger and gradually transistions into more cautious investing as he or she approaches retirement age. This is to take advantage of a growing but fluctuating market, because "noise” and smaller ups and downs aren’t likely to affect younger investors who intend to keep their money in the market for decades. When investors are near the age at which they will need to pull their money out of the stock market, they will need a more conservative investing strategy to minimize any potential losses. Many retirement accounts offer investing plans that automatically create this transition over time, shifting into more bond investments and cash reserves as the investor nears retirement.
Short-term financial planning and investment will require different investing strategies. Many individuals are more conservative when it comes to short-term investments because they will need the money sooner and cannot afford to spend time recovering from potential dips in the market. These investors might choose corporate bonds, short-term treasury bills, certificates of deposit (CDs), money market funds, or high-yield savings accounts. Investment opportunities such as these offer fewer returns over the long term because they generally offer interest rates that hover between 1% and 5%, but they also minimize risk and ensure that the money in the account is safer. Overall, individuals should choose the investment strategy that best matches their personal financial goals and the time frame they have set for achieving those goals.