📌 The Quick Hit
A real investment goal isn’t “to make a lot of money.”
It’s to reach a specific number by a specific time; and to know what needs to happen in between. The clearer your destination, the easier it is to choose the right route and stick with it when the ride gets rough.
🎯 Step 1: Define the Destination
Most investors start with desire (“I want to retire comfortably”) rather than a target (“I’ll need $1.2 million by age 65”).
The first step in setting an investment goal is to make it measurable:
What’s the number?
What will it support - income, legacy, security, freedom?
Clarity isn’t a luxury; it’s the foundation of every smart investment plan.
🔑 Step 2: Use the Rule of 72
Once you know your number, it’s time for a little math. The Rule of 72 gives a quick estimate of how long it takes to double your money at a given rate of return.
Simply divide 72 by your expected annual return.
If you need your money to grow fourfold, just double that timeframe (because it takes two doubles).
This simple rule helps you reverse-engineer your plan. If your “time horizon” [buzzword = how long your money should last] is 15 years and your goal is to double your portfolio, you’ll need an average annual return of roughly 5%.
Now you can work backward from your goal to your allocation strategy.
⚖️ Step 3: Match Allocation to the Goal
Here’s where most investors go off course. They pick investments first - not goals. Goals come first…then, determining when you need to reach your goal (time horizon).
Once you know what you need and how long you have, your asset allocation becomes a strategic decision rather than a guess.
Short time horizon (under 5 years): You’ll need more stability - think bonds, cash equivalents, and conservative allocations.
Medium horizon (5–15 years): A balanced portfolio of 70% stocks and 30% bonds, for example, can deliver growth without excessive volatility.
Long horizon (15+ years): You can afford a heavier tilt toward equities, which historically deliver higher returns over time.
Your allocation isn’t about comfort today; it’s about positioning for tomorrow.
⚠️ Step 4: Manage Risk, Not Headlines
Risk is often misunderstood as “loss.” In truth, risk is the price of progress.
Every investor has a unique threshold - the amount of fluctuation they can endure without bailing out. The trick isn’t to eliminate risk (you can’t), but to understand and manage it:
Rebalance when allocations drift.
Keep enough liquidity for near-term needs.
Diversify across asset types and geographies.
A good investor accepts volatility as the toll paid on the road to compounding.
🧘🏽♀️ Step 5: Stay Disciplined
Here’s the quiet truth of wealth building: the best plan is useless without consistency.
Markets will rise, fall, and confound. The investors who reach their goals aren’t the ones who predict every turn - they’re the ones who don’t flinch.
Stay invested. Stay curious. And when in doubt, revisit your goal, not your fear.
✨ Closing Thoughts
Setting an investment goal is about direction, not perfection.
Once you’ve defined the destination, chosen your route, and committed to staying the course → the day-to-day twists don’t matter nearly as much as you think.
And that’s the subject of our next piece:
“Why the Path to Your Goal Doesn’t Matter - As Long As You Stay on It.”
🚀 Up Next:
Thursday - “How to Detect a Bear Market”
Sunday - “Does the Path to Your Goals Really Matter?”
This publication is for brains, not bets. The Other Side of Obvious shares ideas, stories, and general financial information—not personalized investment, tax, or legal advice. Investing comes with risk (including losing money). Talk to a pro before you act. Please take time to read these important disclosures before you get started.