Personal Finance 1st Edition by Jack R. Kapoor

Exercise 32

1 Why should an investor develop specific investment goals?

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2 What factors should you consider when performing a financial checkup?

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3 Explain the time value of money concept and how it affects your investment program.

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4 Using the information in the Financial Planning Calculations feature, calculate the future value of your investments if you invest $3,000 each year for 20 years. Assume your investments earn 5 percent each year.

Step 1 of 4

The first step of the investor is to establish investment goal. Investment goals must be tailored according to the needs of the investor.

The reason for the investor to establishing the investment goals are as follows:

• Investment goal should be specific and measurable: The investor must have a clear idea of how much money is to invest to reach the goal. This will help in the financial planning.

• Time frame of the investment has to be considered: The investor should consider the investment based on the time frame and also the risk associated within the time frame. Hence, the investor may be able to recognize scarifies those he has to make to reach his financial goals.