7 Smart Ways to Structure Your Portfolio To Meet Your Life Goals

By Chika


Last Updated: November 25, 2021


We all have life goals we intend to achieve.

This may be owning a house, getting married, starting a company, sending kids to college, or traveling to see exotic places. Setting life goals is one way we can numb the noise and distraction of the outside world, and focus on what really matters to us.

It is a process that requires motivating oneself to turn their vision into reality. 

Goals act as a parameter through which we can measure our progress and make the necessary adjustments needed to achieve them. One factor which plays a significant role in how we can achieve these preconceived goals is finance.

Our financial resource is the vehicle that allows us to bring our goals to reality. This implies that in the absence of adequate finance, our goals would merely be dreams and wishes.  


We Are Postponing Our Life Goals

According to Pew Research Centre, millennials are now postponing the achievement of their life goals, despite being better educated than prior generations. Many young adults aged 20-30 years are living with their parents, foregoing marriage to a later time, or choosing not to buy a car or own a home. 

One major factor for this is reduced economic opportunities to improve on finances. Huge debt from student loans, low-paying entry jobs, and rising housing costs have forced millennials to postpone the achievement of life milestones.

The common theme that runs through these reasons is lack of adequate finance. This underscores the important role finance plays in bringing your goals to fruition. 

Savvy investors have long known to attach their investments to life goals. Rather than invest to accumulate profit, experienced investors recognize that money is a means to an end and not an end in itself.

Having a clear picture of what you intend to achieve with your investments is vital to choosing the right approach and meeting your life goals. 


7 Factors to Consider When Structuring Your Portfolio to Achieve Life Goals

However, though it may sound simplistic, structuring your investment portfolio to meet your life goals is not as easy as it sounds, neither is it nuclear physics. It entails considering certain factors. Here are some factors to consider when structuring your portfolio to achieve your life goals. 

1. Identify the goals you want to achieve

The first step in aligning your portfolio to meet your life goals is identifying what goals you intend to achieve.

Ask yourself why you are putting away that amount in an investment vehicle. Perhaps proceeds from the investment would be used to take care of your retirement when you would be less productive.

Perhaps you want to attain financial independence at a younger age so that you can be free to do whatever you want to do. Alternatively, you may be interested in purchasing a home.

Identifying your life goal brings clarity to your investment choices. As such, it is always advisable to attach your investment to a goal. Let your investment have a purpose.

2. Timeframe of intended goal

A goal is a dream with a deadline.

This means that each goal has a longevity period or a time within which it is meant to be achieved. Your goals may either be short-term, mid-term, or long-term. Appropriately identifying the timeframe of your goals helps you to choose a suitable investment vehicle to invest in.

For long-term goals, investing in bonds, stocks or real estate may do just fine. For short-term goals, you may consider index funds or mutual funds. By putting your goal on a clock, you would know which investment vehicle suits your goals. 

3. Age

Like most things in life, age plays a crucial factor in which decisions we choose to implement, our investment choices inclusive.

Age is important because it gives a timeframe of how long you would want to maintain your position in a particular investment. It also determines your approach and outlook.

If you are younger, you would have a longer time horizon to consider than someone who is in their 60s. As such, you may be prone to take more risks than someone who is planning to live off their benefits during retirement. 

4. Suitability

Suitability here implies how suited the investment vehicle is to your life goals.

If you are investing for financial independence, you would want to invest in assets such as stocks (or cryptos) that offer higher risk but potentially bigger gains. However, if your goal is to invest in your child’s college education, the security of your funds would be utmost in your mind.

As such, you may pander to assets that guarantee returns but have low risks such as bonds. In the same vein, if you are saving for a vacation, mutual funds may do just fine for you. As such, it is expedient that you know which asset class is better suited to achieving your life goal.

5. Capital

This plays a huge part in how we intend to achieve our life goals and the speed at which we are able to achieve them. It also influences our choice of investment vehicles and the time we would want to hold an investment. If you have a huge chunk of money, you may want to seek safer investment vehicles and asset classes such as real estate. Conversely, if you have a smaller capital, you may decide to risk it and go all in. 

6. Risk appetite

Your appetite for risk or averseness towards it would determine how you intend to structure your portfolio to achieve your life goals.

Those with a huge risk appetite would tilt towards investment vehicles with high risks such as stocks, cryptos, options, or derivatives. Risk-averse investors would have an affinity for low-risk investment vehicles that guarantee returns such as bonds, real estate, treasury bills, or Certificates of Deposit.

If you understand your risk level, then you would know how much you are willing to risk to actualize your goals. The caveat here is risking only what you can afford to lose 

7. Recognize that life goals change over time

Life is never a straight line, but full of twists and turns, ups and downs.

The topsy-turvy nature of life implies that nothing is guaranteed as there would definitely be changes. As such, it is important that investors take into consideration the ominous fact that our priorities may change over time.

Changes in age, economic status, social life, experience, and environment would have an impact on what goals we set for ourselves at any point in our lives. For example, an unwanted pregnancy or layoff from a job may force an investor to reassess his investment goals or ultimately forgo them.

As such, when investing, it is expedient to make provision of changes. This would enable you to make flexible investing choices and reduce the impact of unwanted events on our investments, thus enabling you to stay the course as you work towards your goal


Choosing Investment Vehicles That Align With Your Life Goals

Investment vehicles are financial products used by investors to seek returns on their investments.

They refer to any method by which people or businesses can invest and grow their money. Examples of investment vehicles are stocks, bonds, treasury bills, certificates of deposit, real estate, and mutual funds.

Investment vehicles may be high risk or low risk. They may also belong, short or mid-term. 

As stated previously, the time frame of your life goals ultimately determines your choice of investment vehicle. The list below outlines the various investment vehicles and their appropriate investing timeframes. 

Long-term investment vehicles

These are investment vehicles which the investor intends to hold for 10 years or more.

This type of asset offers some measure of stability and has consistent returns over time. Investment vehicles that fall into this category are dividend stocks, bond funds, real estate, mortgage, and IRA CDs. 

Mid-term investment vehicles

These are investments which an investor intends to hold for 5 – 10 years, though some financial advisors lower this timeframe to two years.

This type of asset offers investors a balance between risk and return. They are more conservative than long-term investments but more risk-tolerant than short-term options.

Medium-term investments may include bonds with maturity dates between 3 and 10 years, index funds, growth stocks, dividend stocks, and ETFs. 

Short-term investment vehicles

These are investment vehicles which the investor intends to hold for as long as 2 years.

These assets are volatile but more liquid in nature. Examples of short-term investment vehicles include mutual funds, high-yield savings accounts, growth stocks, cryptocurrencies, derivatives, government bonds, and treasury bills. 


Key Takeaway

Life goals make us accountable to ourselves.

They force us to review our progress and make necessary adjustments on a periodic basis. Attaching our investment to life goals serve as constant reminders as to why we chose to invest in the first place.

They also help us to maintain focus and avoid distractions. The positive effects of structuring your portfolio to achieve life goals even transcend beyond financial freedom. It influences our character and makes us more disciplined investors.

It helps us recognize how little factors add up to have a huge impact in the long run, enabling us to make the sacrifices needed to achieve our goal. As such, it is important that investors should structure their portfolios in alignment with their predefined life goals.

Photo by Marvin Meyer on Unsplash


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