Today's article is a guest submission from Janine Guenther CFA, CMT, a Portfolio Manager and Senior Wealth Family Advisor with over 30 years of industry experience. The views presented here do not necessarily represent those of Bellwether Investment Management.

“There is no way that you can control your life if you are not in control of your money.”

This is the advice our dad, the father of four daughters, would tell us as he counselled us as we planned for university and careers. The advice applies to everyone, but it resonates with me because he worries about the success and independence of the girls he and our mom were raising.

Today is all about exploring the process of determining investment goals, ones that are tailored to the unique circumstances and experiences that make up your life.

Many of us have read and listened to the personal finance pundits who have told us to start saving early so that we will be able to have everything that we want in retirement. "Everything" is a tall order, but on the plus side, they've given us plenty to unpack here.

Saving is, of course, an integral part of managing your finances, but without a process or plan in place, it’s similar to hiking in the wilderness without a destination—a healthy habit, surely, but you may not find the peak of the mountain for that beautiful vista view. Instead, here’s a map for the intrepid with a 6-step process to help you continue learning and, more importantly, make great decisions with your wealth informed by what you want to get out of this journey we call life.

1) Reflect on Your Life Stages and Priorities

Every stage of life invites its own set of challenges and opportunities. In my own experience, priorities tend to shift around, develop over time, or overtake one another. Saving for our children's education probably won’t top the list after they’ve all graduated; caring for my ageing was an alien concept in my youth; and planning for retirement is… well, that one has staying power, but we’ll talk about that in more detail at a later date—retirement lasts well beyond that last day in the office. Take a moment to reflect on where you are in life and what matters most to you right now, or what might become a priority in the future. This self-awareness will help you set realistic and, just as importantly, meaningful investment goals.

2) Identify Your Financial Goals

Once you've established priorities that suit your stage of life, it’s time to translate them into tangible financial goals. If you can be as specific as possible while defining the goal itself and the timeframe for achieving it, you'll be better able to judge how attainable they really are. Some examples include:

  • Building an emergency fund (funded within 3 years, parked until needed)

  • Saving for a down payment on a home (funded within 5 years, spent when buying conditions are right)

  • Funding your children's education (funded throughout their childhood, used when they attend post-secondary)

  • Preparing for retirement (funded throughout your career, drawn on between 60 to 99)

  • Supporting charitable causes close to your heart (funded as appropriate)

3) Assess Your Risk Tolerance

Risk tolerance is a crucial factor in determining your investment strategy. Your ability to withstand risk and volatility depends on factors such as income, income uncertainty, financial knowledge, and overall net worth or financial stability. Evaluate your comfort level with market fluctuations and honestly consider just how much of a potential loss you can manage, as this will guide the types of investments you choose. In my practice, I often encounter people who tell me that they have a high risk tolerance that could make stuntmen groan, but I like to tell them that risk is like if someone puts a snake in your lap—you just do not know how you are going to react. It’s important to be honest with yourself when assessing your ability to take on and manage risk—the former is easy, but the latter is where people tend to struggle.

4) Consider Your Investment Horizon

You may have several investment horizons, or, in simpler terms, the length of time you plan to hold your investments before needing access to those funds. The longer your investment horizon, the more risk you can potentially take on, as you have more time to recover from market downturns as, broadly speaking, they trend upwards over longer periods. Monthly volatility is much more palatable when you look at the underlying security from an annual, or multiyear, perspective—if you have a long-term perspective, that is. Investing for long-term goals, such as retirement, typically allows you to take on more risk compared to saving for a short-term goal, such as a down payment on a house. It's perfectly fine to have a different time horizon for different projects—in fact, it's healthy to do so!

5) Diversify Your Portfolio

Diversification is key to managing risk and reaching your goals without overexposing yourself to the whims of any one sector, asset class, or location. Of course, your unique perspectives and priorities will influence your investment choices, but if you have a passion for figure skating and suddenly there’s a global trade embargo on skates or lycras, your investments in those industries won’t take too kindly to the news. A silly example, but an effective one nonetheless. Consider diversifying your portfolio across different asset classes, sectors, and geographic regions to mitigate risk and maximize potential returns.

6) Review, Rinse and Repeat

Repeat after me: my investment goals are not set in stone. As you move through life, as your circumstances adapt, and as new developments come to the fore, you can rest assured that your priorities and risk tolerance may shift as well. Having professional wealth management will allow you to measure your performance, review your goals, reassess your risk tolerance, and adjust when necessary. As always, the best financial plan is one that’s nimble, responsive, and works in lockstep with your life.

Determining investment goals requires careful consideration of the various stages of your life, priorities, risk tolerance, and investment horizons. By following these steps and staying true to your values and aspirations, you can create a well-rounded investment strategy that supports your financial well-being and empowers you to achieve your dreams.

I think about my dad’s words often when I meet with families. I think he would be happy that I am spreading the word further and helping more people feel confident about their wealth decisions.

Next time, we'll discuss, well, how to even talk about money, as well as the best practices on how to cover the wrongfully considered “taboo” topic with your spouse, children, and other members of your family.


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© Bellwether Investment Management Inc. 2024. This communication is intended for residents of the provinces in which we are registered and is not meant to be a solicitation to any persons not resident in those provinces. Any opinions expressed in this article are just that, and are not guarantees of any future performance or returns. Some of the information contained in this article has been drawn from sources believed to be reliable but due to the fact that it is provided by a third party, it cannot be guaranteed to be accurate or complete. Bellwether Investment Management Inc., Bellwether Estate and Insurance Services Inc. and Bellwether Family Wealth cannot provide tax advice and therefore we recommend that you consult your tax advisor for further assistance with your tax planning and the preparation of your tax return. The report is prepared for general informational purposes only and the securities mentioned in this report should not be construed as a recommendation for any specific securities.

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