By Samantha Lamas

What are your top investing goals? Every investor must face this question, and it’s surprisingly difficult to accurately answer it. That’s because we tend to refer to what’s readily available in our minds, which may not always be our true, long-term goal.

For example, someone may have recently read an article about a vacation in Italy. When asked about long-term goals, they might respond with: “I’d like to take exciting vacations,” even though they also care deeply about leaving a legacy of charitable works.

It’s not that the person is insincere or that his/her other goals aren’t deeply held — it’s just that s/he is relying on what’s top of mind and easy to recall.

Changing the way we talk about goals


Tailoring your financial plan around your personal goals can both increase your total returns and motivate you to stay on track. But the success of this technique depends entirely on having the right goals—which research suggests we, as investors, struggle to identify.

Thankfully, gaining a more thorough and considered understanding of your goals isn’t difficult; it just takes a different approach. To understand how this works, please try the technique out yourself:

1. First, take out a notepad and write down your top three investing goals.

a) Most important goal: ______________________________________

b) Second most important goal: ________________________________

c) Third most important goal: __________________________________

2. Now, take a look at the following master list of common investing goals. Are there any goals here that you consider important but didn’t include in your initial list? If so, write them down.

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Figure 1: Master List of Common Investing Goals

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3. Taking both your initial list and the master list into consideration, think about your top three investing goals again and write them down. Has your list of top goals changed? If so, how has your list changed?

A simple, but effective approach: Using a master list


If your goals did change, you are not alone. In a recent study conducted by Morningstar, researchers tested two different ways of asking people about their goals. First, they asked people to simply list their top investing goals. Then they used the master list, and asked them to reselect their top goals, drawing from both lists. In other words, the second round included a prompt to help people remember other things that might be important to them.

In the study, 73 per cent of people changed at least one of their top goals after seeing the master list. The researchers found that, for many people, their final list of top investing goals was quite different from their initial list. After considering the master list, some people who initially thought in broad, vague terms about their goals, began to formulate goals that were more specific and vivid. The master list also helped many respondents with initial goals that focused solely on financial outcomes, which tend to be impersonal and potentially unmotivating, to reframe their goals in terms of their emotional and personal value.

There’s much more to learn from the study. If there’s one immediate lesson for investors and advisers, it’s this: Using a master list helps investors think broadly about the range of goals they may have for investing.

So, next time you are faced with this question, try using a master list to aid your decision. This can help make sure that you answer with your true goals, and not just ones that are top-of-mind.

(Samantha Lamas is a Behavioral Researcher at Morningstar. Views are author’s own)





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