To fund your goal, your investments will need to achieve a certain return. The required return will determine how you invest, for example in more growth assets if you need to achieve a higher return. However, a higher allocation to growth assets means taking on more risk (market volatility). The bottom line here is that your goals will require a specific minimum return that is higher than inflation. You need to assume an equivalent risk to achieve your required return.

The more time you have, the more aggressively you can structure your investment portfolio. For example, if you have 20 years to save towards your goal, you can risk volatility (up and downward movements in capital value) over the short term due to market fluctuations. Your investment has enough time to recover after a market collapse. 

If you only have a few years to save towards your goal, you need to be more conservative in your investment choices, limiting the investment risk and therefore also the returns that you could potentially earn. 

Together with your financial planner, you need to determine whether your goal is flexible enough to adapt to the range of returns you could experience over any given term. If not, you may need to consider other trade-offs such as reducing your spending, saving more or extending the time period for your goal.

It’s important to determine how much you can handle to lose, both emotionally and financially, to put together a plan that balances your long-term need for growth with your risk profile. 

Each investment target has its own return objectives and behaves differently over time. During market turbulence it’s easy to think of risk with our emotions rather than logic. Therefore, even though it would make sense to take on more risk to meet their goals with more certainty, investors sometimes avoid risk to sleep better at night, even though they then run the risk of not beating inflation or achieving their goals.