Setting Investment Goals: The Five Ws of Investing

ITHACA, NY – 08 Feb, 2016 – You are considering investing.  You have received an inheritance, saved a substantial sum of money, or you are beginning your career and you understand the importance of planning for your future.  Regardless of the reason, you will likely need a financial advisor to help you develop the right investment strategy.

“A successful investment strategy is multifaceted. A number of factors must be taken into consideration,” says Bill Winters, Senior Vice President and Managing Director for Tompkins Financial Advisors in White Plains, NY. “It requires setting goals and answering a series of related questions to inform a sound investment strategy.”

What do you want to achieve with your investments

Make a list of your goals. The list might include purchasing or building a house, establishing a college fund, starting your own business, and saving for retirement. Try to associate a cost for each goal. While it may be hard to project the amount of money you should contribute to your child’s college fund, you may have an idea of what it will require to buy property or what you will need for a comfortable retirement. Your financial advisor will be able to help you with cost projections, but it’s good to have a starting point.

What is the time horizon for each of your goals

Your time horizon is the length of time you have to actively invest.  Visualize the horizon as an arch and draw it on a piece of paper. Add your goals and associated costs along the arch.  You might write: purchasing a home near the beginning; starting a business towards the middle; buying a vacation property at the ¾ point; and retirement at the end. You might also add your current age at the beginning and your projected retirement age at the end, and the ages when you wish to achieve other goals along the way. This will help you visualize the arch of your investment life and the time needed to realize each of your goals.

What are your sources of income and how much can you invest

List your sources of income, household expenses and other financial obligations, such as college loan payments. One you have a picture of your revenue and expenses and how much you need for personal cash flow, you can then determine how much and how often you can realistically contribute towards your goals.

What is your risk tolerance

While your investment advisor will plan a strategy to mitigate loss, investments fluctuate. How comfortable are you with the possibility that you could lose some of your investment principal? Are you prepared over the long term to ride the ups and downs of the market or are you risk adverse?  Your answer will be directly related to your goals and time horizon. Your level of tolerance will inform your advisor’s suggested investment strategy.

What are your liquidity needs

Perhaps you plan to buy a house in the next few years. If this is the case, your advisor will suggest funds that have a high growth potential, and can be easily liquidated for a down payment and closing costs when the time comes. If you need reserves for an emergency, perhaps part of your investment will go into a money market account or publicly-traded stocks that can be also be easily liquidated. If you already own a home, and have cash reserve, then your liquidity needs may not be as great.

Answering these important questions will take some time, but will be worth the effort. Along with defining your goals, you will have a clearer picture of your finances, how much you have to invest, your time horizons, risk tolerance and your liquidity needs. All are important considerations for creating a sound investment strategy. Now it’s time to make an appointment with your financial advisor and get started on realizing you financial goals.

About Tompkins Financial Advisors:

Tompkins Financial Advisors is an independent, fee-based, wealth management firm with offices throughout New York and southeastern Pennsylvania. We take tremendous pride in our fiduciary approach to serving our clients’ best interests which has led to our 95+% client retention rate.

Tompkins Financial Advisors is part of Tompkins Financial Corporation, a financial services holding company, publicly traded on the NYSE MKT under the symbol TMP.  Tompkins Financial was founded in Central New York over 175 years ago and is still headquartered there. The company is committed to creating long-term value for our clients, our communities and our shareholders. Tompkins has been recognized as among the strongest and best performing financial institutions in the country by numerous third party organizations, including The Staton Institute, Sandler O’Neill & Partners and KBW (Keefe, Bruyette & Woods).

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