4 Investment Considerations (2024)

You’ve dipped your toes in the investment pool, and now you’re ready to dive in. Or maybe you’ve been swimming laps for a while. Before you move forward, put some time and effort into creating or reviewing your investment strategy. More specifically, consider these four factors, and how they might need to be altered for optimal success throughout your time as an investor.

1. Goals

Your goals or reasons for investing will probably change as the years go by, and expanding or changing your goals should be reflected in your investment strategy because some investments can be more beneficial or tailored to specific goals. For example, you may start investing because you’re worried about your 401(k) building enough retirement income, so you open an IRA or a mutual fund specifically for later years. When you start thinking about kids, you might add the goal of investing in a college fund, like a 529 plan.

How will you use the returns from your investment? Which investments are geared towards that objective? Assessing your goals will give you a better idea of what to focus on when it comes to investment options, and which options will best meet your needs.

2. Time Frames

The timing for your goals – and your life in general – play a big part in the success of your investments. The amount of time you have between when you invest and when you need the returns (to meet your goals) will determine what kind of investment you make and how much risk you take.

Ask yourself how much time you have to invest before cashing in the returns. Do you have a short term goal (less than five years), a long term goal (over ten years), or somewhere in between? For example, if you have a goal of building retirement savings by investing and you’re twenty years away from retiring, you may choose to make twenty years your time frame.

Then, consider your investment options and whether or not they have the ability to perform well within your goal’s time frame. If your investment choice is more volatile, will you have enough time to recover and still meet your desired objective?

3. Risk Management Strategies

While not all risk can be avoided, there are steps you can take to minimize the exposure to your portfolio and work towards financial success. As you build an investment portfolio, consider the different strategies to managing risk: asset allocation, diversification, dollar cost averaging, etc. While there are many parts to each strategy, here are a few questions to get you started.

Are you diversifying your portfolio across several different asset classes? Are you contributing a set amount every month towards your investments? Is your current strategy for buying and selling helping you achieve a lower average cost per share?

4. Tax Considerations

Knowing your tax responsibilities means no surprises later on. For example, if you annually invest $3,000 in a Traditional IRA with an 8% rate of return for twenty years, and you calculate how much it will yield at retirement (about $148,000) but don’t factor in paying taxes on withdrawals, you may be pretty disappointed when you make the first withdrawal, and it’s lower than expected. If you are in a 28% tax bracket, that $148,000 IRA would actually be worth about $106,000 after paying taxes.

Some investments are taxable or have partial taxes, and some are tax deferred. When you invest, be aware of your tax responsibilities and plan how you will meet those expenses. Factor in the cost when you’re calculating how much to invest and projecting ROI.

Taking into account each of these four factors can help you build a better investment strategy. Still fuzzy on how to incorporate each part? Talk to your Money Coach. Money coaches cannot provide specific investment advice, but they can help you develop important goals, determine time frames that align with your lifestyle, decipher your level of risk, and help you consider taxes, and they’ll show you how to access investment calculators. Call 888-724-2326 and feel better about your investment strategy.

4 Investment Considerations (2024)


4 Investment Considerations? ›

Your investment strategy depends on your personal circ*mstances, including your age, capital, risk tolerance, and goals. Investment strategies range from conservative to highly aggressive, and include value and growth investing. You should reevaluate your investment strategies as your personal situation changes.

What are the 4 factors to consider when investing? ›

Here they are, in no particular order:
  • Return on Investment (ROI) ROI is often considered to be the holy grail of all metrics when it comes to assembling one's portfolio. ...
  • Cost. ...
  • Time to Goals. ...
  • Tax Considerations. ...
  • Liquidity.
Dec 23, 2022

What four considerations are important to investors? ›

Vanguard's Principles for Investing Success
  • Goals. Create clear, appropriate investment goals. An investment goal is essentially any plan investors have for their money. ...
  • Balance. Keep a balanced and diversified mix of investments. ...
  • Cost. Minimize costs. ...
  • Discipline. Maintain perspective and long-term discipline.

What are the considerations for investments? ›

Your investment strategy depends on your personal circ*mstances, including your age, capital, risk tolerance, and goals. Investment strategies range from conservative to highly aggressive, and include value and growth investing. You should reevaluate your investment strategies as your personal situation changes.

What are the 4 C's of investing? ›

Trade-offs must be weighed and evaluated, and the costs of any investment must be contextualized. To help with this conversation, I like to frame fund expenses in terms of what I call the Four C's of Investment Costs: Capacity, Craftsmanship, Complexity, and Contribution.

Which are the 4 core characteristics of impact investment? ›

Characteristics of impact investing

These four characteristics are (1) Intentionality, (2) Evidence and Impact data in Investment Design, (3) Manage Impact Performance, and (4) Contribute to the growth of the industry.

What are the 4 principles of money management? ›

WHAT ARE THE FOUR PRINCIPLES OF FINANCE? The four principles of finance are income, savings, spending, and investing. Following these core principles of personal finance can help you maintain your finances at a healthy level. In many cases, these principles can help people build wealth over time.

What 4 factors will investors consider in the analysis of a firm market share value? ›

Investing has a set of four basic elements that investors use to break down a stock's value. In this article, we will look at four commonly used financial ratios—price-to-book (P/B) ratio, price-to-earnings (P/E) ratio, price-to-earnings growth (PEG) ratio, and dividend yield—and what they can tell you about a stock.

What are the 4 types of investors due to the personality typing approach? ›

Understanding the different investor personality types
  • Methodical investors. As the name suggests, methodical investors tend to follow a conservative investment philosophy. ...
  • Cautious investors. ...
  • Individualist investors. ...
  • Spontaneous investors.

What are 3 things every investor should know? ›

Three Things Every Investor Should Know
  • There's No Such Thing as Average.
  • Volatility Is the Toll We Pay to Invest.
  • All About Time in the Market.
Nov 17, 2023

What are the most important factors in investing? ›

Some common macroeconomic factors include: the rate of inflation; GDP growth; and the unemployment rate. Microeconomic factors include: a company's credit; its share liquidity; and stock price volatility. Style factors encompass growth versus value stocks; market capitalization; and industry sector.

What is Stage 4 in investing? ›

Stage 4: Markdown (or decline)

This is the final stage of the market cycle, and the one that many investors want to avoid. At this point, buyers who got in during the distribution phase and are underwater on their positions start to sell.

What are the major four 4 assets of an investors portfolio? ›

Investing in several different asset classes ensures a certain amount of diversity in investment selections. Diversification reduces risk and increases your probability of making a positive return. The main asset classes are equities, fixed income, cash or marketable securities, and commodities.

What is the 4 C concept? ›

The 4 C's of Marketing are Customer, Cost, Convenience, and Communication. These 4C's determine whether a company is likely to succeed or fail in the long run. The customer is the heart of any marketing strategy. If the customer doesn't buy your product or service, you're unlikely to turn a profit.

What are the 3 A's of investing? ›

Amount: Aim to save at least 15% of pre-tax income each year toward retirement. Account: Take advantage of 401(k)s, 403(b)s, HSAs, and IRAs for tax-deferred or tax-free growth potential. Asset mix: Investors with a longer investment horizon should have a significant, broadly diversified exposure to stocks.

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