By Debbie Dragon

Sometimes beginning investors forget the trick to success when it comes to investing money: you need to match your future financial goals to the right kind of investment. If you start with figuring out how to allocate your assets as your primary goal, you’ll have the money you need in the future.

What are your goals?
When deciding where to put your money or how to invest, you need to consider your short- and long-term goals. Are you looking to buy a new car? Do you want to stop renting and buy a house? Maybe you need an emergency fund for unexpected situations, or you’re saving to send your babies to college. And don’t forget about retirement! You probably have several goals -- make a list and prioritize the list by which goals are most important to you. Next to each item on your list, put an estimated value for how much money you need. The number does not need to be exact, but use online calculators to get a good idea for how much you’ll need for college when your children are old enough, how much you’ll need for retirement, and for each of the other goals on your list. Once you see your goals written in black and white and listed in order of priority, put a timeline for each. Which of these goals do you need to achieve first? Maybe your children are in elementary school so you have several years to save toward their college while you may need a car in the next year or two. Put a date next to each goal on your list.

Match your assets with your goals
Short-term goals need short-term assets, or at least access to the money in a short period of time as opposed to long term investments that tie your money up for a specific period of time. Short-term goals are best funded with cash investments like savings accounts, certificates of deposit or money market accounts. These options don’t offer a high return but they are safe and you can easily access your money when you need it for emergencies. Long-term goals can take advantage of investments that earn a higher return or mature at a date further into the future than cash investments. You can look into long-term certificate of deposits or bonds that mature at a specific date to match when you need the money. For retirement, the stock market is an appropriate option as long as you stick with it -- the return generally outpaces inflation over time.

Make changes as you reach your goal dates
In addition to matching your assets with your goals, you need to remember it is not a “set it and forget it” process. As you get close to the dates for each of your goals, you may need to make adjustments or move the money into less risky investments. For example, if you are reaching your retirement age, you will want to move at least a portion of your retirement savings into non-risk savings or short-term investment options.

MyBankTracker is an independent resource that helps consumers make smarter banking and money decisions.

Related Articles
  1. Budgeting

    8 Clear-Cut Ways To Becoming A Better Saver

    These sure-fire budgeting tips will boost your savings quickly. The only trick is setting aside your excuses are getting started!
  2. Personal Finance

    3 Financial Tasks We Think Are Harder Than They Really Are

    Use these three tips to help put your financial situation into perspective. It turns out, organizing your finances isn't nearly as hard as you thought.
  3. Investing Basics

    Women: Invest In Your Financial Literacy

    Learning about money may seem intimidating, but it's not as hard as it looks.
  4. Savings

    Don't Sacrifice Saving Just For The Economy

    Consumers should think twice before they sacrifice their saving habits for a faster-growing economy.
  5. Taxes

    How To Save More For Your Retirement

    The Economic Growth and Tax Relief Reconciliation Act of 2001 made it easier to prepare for the future. Will you be ready?
  6. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  7. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI KLD 400 Social

    Find out about the iShares MSCI KLD 400 Social exchange-traded fund, and learn detailed information about its characteristics, suitability and recommendations.
  8. Mutual Funds & ETFs

    ETF Analysis: PowerShares DWA SmallCap Momentum

    Find out about the PowerShares DWA SmallCap Momentum Portfolio ETF, and explore detailed analysis the fund's characteristics, suitability and recommendations.
  9. Trading Strategies

    How To Buy Penny Stocks (While Avoiding Scammers)

    Penny stocks are risky business. If want to trade in them, here's how to preserve your trading capital and even score the occasional winner.
  10. Professionals

    Don't Let Your Portfolio Be Trump'd by Illiquidity

    A look at Donald Trump's statement of finances and the biggest lesson every investor can learn.
RELATED TERMS
  1. Internal Rate Of Return - IRR

    A metric used in capital budgeting measuring the profitability ...
  2. Systematic Manager

    A manager who adjusts a portfolio’s long and short-term positions ...
  3. Unconstrained Investing

    An investment style that does not require a fund or portfolio ...
  4. Linked Transfer Account

    Accounts held by an individual at a financial institution that ...
  5. Equitable Division

    A legal theory that guides how property acquired during the course ...
  6. Tactical Trading

    A style of investing for the relatively short term based on anticipated ...
RELATED FAQS
  1. Do penny stocks pay dividends?

    Because of the small market capitalization and revenues typical of most penny stocks, there are very few that offer dividends. ... Read Full Answer >>
  2. Can you buy penny stocks in an IRA?

    It is possible to trade penny stocks through an individual retirement accounts, or IRA. However, penny stocks are generally ... Read Full Answer >>
  3. Where do penny stocks trade?

    Generally, penny stocks are traded through the use of the Over the Counter Bulletin Board (OTCBB) and through pink sheets. ... Read Full Answer >>
  4. Where can I buy penny stocks?

    Some penny stocks, those using the definition of trading for less than $5 per share, are traded on regular exchanges such ... Read Full Answer >>
  5. How soon should I start saving for retirement?

    The best answer to the question, "How soon should I start saving for retirement?", is probably, "yesterday," and the second ... Read Full Answer >>
  6. Can my child have an IRA/Roth IRA?

    One of the best assets a person can have is an individual retirement account (IRA), and children can have one as long as ... Read Full Answer >>

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!