Start Running Only After Knowing the Finishing Line

1132907_finish_directionFew weeks back I read an interesting comment to an article on seeking alpha; Investor’s sole objective is to maximize capital appreciation (or returns) and in doing so follow a path of minimum risk. This is not a quote but essentially what it meant. I pondered over it and came to conclusion that comments section is not a place to divulge or express the target and goal. In essence, it does sound right.

So I talked to few other folks about their investing objectives and almost everybody had a similar thought process. Maximize your returns within minimum risk, devoid of any target or methodology. Even after few probing questions, it was clear to me the lack of a target. I even gave examples like, I have 100K to invest, now what should I do and how should I grow this capital. With few exceptions, the response I got was; do this for x% return; do that for xx% return; or wait for this opportunity and then invest to xxx% in three years, etc. I was pretty surprised by this.

Surprised because without an end goal, or target, how will an individual attempt to maximize the returns and how will one determine the minimum risk. Many folks were more focused on figuring out returns, instead of identifying a goal and working to achieve it.

  • One goal could be to make 1000K in 10 years which forces me to plan 10% annual returns. I can then decide which investment opportunities should I be using and what is risk associated with it.
  • Another goal could be to make 1000K in 5 years, which forces to plan for 20% annual return. And here also I can then execute accordingly.
  • Still another could be 6K cash flow every year with increasing capital appreciation reaching 500K in 7 years.

But to say, invest in this vehicle or do this for such returns, is something I could not understand. It’s like keep running, someday, you will reach somewhere!

One Response to “Start Running Only After Knowing the Finishing Line”

  1. The trouble with those kind of goals is that they usually depend upon the future resembling the past.

Leave Your Comments

Personal Blogs - BlogCatalog Blog Directory ~