Why goal setting is crucial to successful investing

The information in this article is market commentary only and reflects Lincoln's views and beliefs at the time of preparation, which are subject to change without notice. To obtain up-to-date information, please contact us.

Successful entrepreneurs and business owners will tell you that setting goals and objectives is essential to achieving favourable results. This concept holds true when you build your share portfolio. By doing so, you’ll be able to execute a more focused, strategic investment plan. This will help you make better investment choices, and avoid you taking risks, and potentially losing it all.

Think of just about any scenario in life, be it a holiday, getting a job or renovating a house; you always have a very clear and simple objective to achieve your end goal. The three things you need to remember are that it has to be:

1. Achievable
2. Clear and simple, and
3. Keep it top of mind


Why bother setting investment objectives?

There are two compelling reasons you should set objectives when building your share portfolio.

1. Focus
Setting an objective will keep you focused on what stocks to buy, hold or sell and minimise the chances of having stocks in your portfolio that don’t align with your investment profile and cost you money.

2. Clarity
Setting goals will enable you to determine the most effective outcome for your portfolio. For instance, if your objective is income, and you’re holding stocks that are only ever going to give you growth, that’s going to mead your other stocks are having to do more of the lifting from an income perspective which may lead you to taking on more risks.

It doesn’t have to be all or nothing. It’s perfectly acceptable to have stocks that fit both growth and income objectives. For example, you might be in it mostly for the income, to fund your retirement, but also acknowledge that you need a few growth stocks in your portfolio in order to satisfy the overall objective of your investment.


Tactics to keeping you on the straight and narrow

1. Stock levels
They’re an important element to staying on track, and being aligned to your objective. Mapping out your objective is one thing, but getting into the detail about how you’re going to do that when faced with multiple choices, will be key to staying on the right path.

2. Sell strategy
Having a robust strategy around timely selling of your shares, could actually be the single most important rule you should adhere to. Don’t let emotion drag you away from your overall objective. It is absolutely critical that when you buy a stock, you already know when you’re going to sell it. Exit strategies are so important because failing to have one, could cost you a lot more than just the bad purchase decision. More on that can be found in our Avoid these 5 common mistakes when selling article.

If you hold on too long, and don’t know when to let go, it will do serious damage and cause a gaping hole on your portfolio.

So, when you buy a stock, know exactly when you’ll cut ties. And stick to it!


How to set your investment objective

A great place to start is by downloading the White Paper that covers this topic in depth. Demonstrating that following your strategy (and the fundamental rules) and not the herd, is the way to success.

Remember to ask yourself; “Is an investment in this business going to support my objective, and deliver the very best opportunity to maximise my returns?” If the answer’s “no” or “not sure”, don’t buy it, hold out and wait for the right opportunity. It will come.

The decisions you make today are amplified 10-fold by the time you get into your retirement years. So, what may seem like a relatively minor compromise now, could have really significant consequences 20 years down the track. It helps to put these things in perspective, so, bad decisions made now, could quite literally translate into having to make some really difficult choices in your senior years. For example, being forced to choose between keeping your car and independence, or choosing to pay your utilities.

We don’t want any senior Australians having to make these tough decisions, which is why we provide a lot of educational resources to our members. They are all free with a Stock Doctor membership, and they’re all designed with one objective: to help you become a confident and well informed investor so you can meet your financial goals. You can find out more about Stock Doctor memberships here, or by talking to one of the Lincoln team here.

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Successful Investment Strategy White Paper


Important: Lincoln Indicators Pty Limited ABN 23 006 715 573, as Corporate Authorised Representative of Lincoln Financial Group Pty Ltd ABN 70 609 751 966, AFSL 483167. This blog may contain general financial product advice. It has been prepared without taking account of your personal circumstances (including your objectives, financial situation or needs) and you should therefore consider its appropriateness in light of your objectives, financial situation and needs, before acting on it. You should read and consider our Disclaimer for more Important Information and our Financial Services Guide (FSG) which sets out key information about the services we provide. The Disclaimer and FSG are available at