Plan Your Prosperity: The Only Retirement Guide You'll Ever Need, Starting Now--Whether You're 22, 52 or 82

State Your Goals

Your investing goals are key to selecting an appropriate benchmark. You should be able to state them simply, though they can cover a wide array of objectives.

At a very high level, most investors’ goals fall into one of these broad buckets:

• Growth—of some degree.
• Cash flow—of some degree—whether now or at some point in the future.
• Some combination of those two.
• Capital preservation (which investors often initially think they want, but is often inappropriate for investors with longer time horizons).

For the most part, and for most investors, goals shouldn’t be any more complicated than that.

What about “capital preservation and growth”? In reality, as discussed in Chapter 2, capital preservation and growth are two separate and inherently conflicting goals.

To get growth, you must accept some level of near-term volatility risk. True capital preservation requires complete or near absence of volatility risk. If you have a growth goal and implement it well, over a very long period, you likely will have grown your assets and thereby also preserved your capital. But that means experiencing relatively shorter periods of downside volatility—the opposite of a capital preservation goal. Be very wary of any strategy that purports to satisfy both goals at the same time.

There are other goals you can accomplish via financial planning, like insurance and estate planning. However, for the most part, you don’t want to commingle insurance needs and an investing strategy.

There ...