Goal Setting

When it comes to investing, nothing is guaranteed.  But that doesn't have to stop me from setting some lofty goals.  I list them here, in rank order of importance.

1. The number one goal is to not lose money.  Protecting principal is job #1.  For instance, 20% returns for 4 consecutive years can be almost completely erased with a -50% return in the 5th year.  I must try my hardest to avoid harsh negative returns.  I will define this in more detail in a later post.
2. I am benchmarking myself against the S&P 500, and thus intend to beat it over the long term.  My assumption is that the default investing strategy for normal people should be to invest in a broad market index fund.  Deviating from that strategy should result in improved returns otherwise why bother?
3. I also want to benchmark myself against my own financial advisor.  If I can't beat my financial advisor on a net basis, I am better off paying him to manage my funds.  Historically, my advisor has consistently outperformed the S&P 500, as his strategy already mostly adopts Graham's "defensive, dollar-cost-averaging strategy" with slight tactical allocations to favorable sectors.  Beating him will actually prove a fairly high water mark, since I'm competing against a version of my own strategy.  I will discuss this in more detail in a later post.
4. I want to double my money in 5 years.  That would require nearly a 15% year over year return over 60 months.  Common sense says that this is quite a stretch, but it doesn't hurt to aim high so long as I don't allow myself to take stupid risks in order to reach this goal.

** Updated on 2012-02-13 **