What are your investment goals?

To invest successfully, you need to establish investment goals. Clearly defining your goals will help you select the most appropriate investments to achieve them. You need to have a thorough understanding of what you are investing your money for because different types of investments are suited to achieving different goals.

For example, if you’re investing to send a child to college in 15 years, you’ll need an investment vehicle that can grow, or appreciate, in value. If you’re investing to help supplement your monthly income during retirement, then you’ll need an investment vehicle that seeks income.

There are a number of goals you may want to achieve when investing, but most likely they fall into one or both of the following categories:

1. Capital growth: building and protecting your money
Planning your investments may help your capital to grow at a real rate of return (after fees, taxes and inflation) so that you'll be able to buy more in the future than you could if you spent your money today. Typical goals would be college, retirement, building a home, buying vacation property.

2. Income generation: paying an income
You may want to reach a stage in your life when you can choose to live off your capital. Typically, this is when you retire and you want your capital to support your lifestyle.

There are many investing options available to help you obtain your monetary goals. In general, stocks are seen as a growth investment, though some stocks do provide income by paying dividends, while bonds are seen as income-producing investments.

Time Horizon

Another important factor in choosing investments is your time horizon - how far into the future your goals are. This helps you determine how much risk you can or should be taking and what investments you should consider to help you reach your goals within this time horizon.

Typically, shorter-term goals require more conservative investments in order to reduce the risk of principal loss. Conversely, the more time you have until you need your investment dollars, the more risk you can afford to take on, as long as you are comfortable doing so.

Following are some common investment objectives of mutual funds, which can assist you in determining what type of investments you may consider in order to meet your goals within your time horizon.

	Long-term capital appreciation
	Total returns (capital appreciation and income) greater than a particular index
	Current income
	Current income that’s free from federal and/or state income taxes
	Current income with capital preservation
	Current income with liquidity and capital preservation
	Current income with stable share value

A mutual fund’s investment objective can be found in its prospectus, where you’ll often see it stated in terms of both objective and time horizon. It’s important to remember that these are objectives, meaning that’s what the investment strives to accomplish. There is no guarantee that any investment will achieve its objective.