Don’t take a backseat. Steer your future.

Your goals are your destination – and getting to that destination will need solid direction.

Imagine that you’ve just come into a large and unexpected sum of money. What long-held goals could you accomplish? How much would you save, spend or give away?

Though this may never happen, daydreaming about how you would handle a sudden windfall can be very instructive. After all, over the course of a lifetime, many people have substantial sums of money pass through their hands.

Yet because it happens gradually, they never make a plan that spells out their most important goals – or how they will attain them.

Your Destination: Setting goals and priorities

To secure the resources you need to get to where you want to go, it’s important to define your expectations for the future as precisely as you can – not only what you want, but also what it will cost. Without that, it’s virtually impossible to put together a coherent investment strategy.

You will have the best chance to reach your goals if you have a clear investment strategy tailored to your personal goals and guidelines. 


Your Guide: Working with a financial advisor

A qualified financial advisor has the training and resources to help you find the right answer for your particular situation. Through a comprehensive understanding of your goals, a financial professional can help to translate them into an effective strategy.

Your financial advisor – the professional architect of your investment plan

With a keen eye on your goals, your financial advisor uses a well-defined process to monitor and fine-tune your strategy.

During periods of market turbulence, your financial advisor can provide investment discipline and guidance for staying on strategy.
Rules of the road: Principles of investing

To help you stay on track toward your personal investment goals, understanding key principles is vital.

Risk and return: Two sides of the same coin. All investments have some degree of risk; an investment might not generate as high a return as expected, or it might even result in a loss of principal. Yet there is a positive side to risk. In general, the riskier the investment, the higher the return expected by investors. In the end, risk makes it possible to accumulate wealth over time.

Volatility: Measuring how much prices change. One of the most commonly accepted measures of investment risk is volatility — sometimes called “market risk.” This indicates the degree to which the value of an investment rises or falls over time. In and of itself, volatility is not a bad thing. It can mean price gains as well as losses. However, volatility can be an issue if you intend to cash out your investment at a particular point in time.

The power of compounding. The head start you gain by investing a small amount today can be equal to investing a much larger sum 10 years from now. To reach a dollar goal in the future — say, $100,000 toward the costs of a newborn’s college education — it pays to invest as early as possible.

If you have time and patience, compounding can be a powerful force for your portfolio. Compounding means that all dividends and interest earned can themselves earn further interest and dividends in future years.

The exponential power of annual compounding ($)

Source: Legg Mason. For illustrative purposes only. Past performance is no guarantee of future results. All rates are hypothetical. The graph above does not represent the performance of any specific investment. The example above assumes no withdrawals and does not take into account any fees, expenses and tax consequences.


Diversification. Diversification, or spreading your money across different types of asset classes, is a fundamental technique to manage investment risk. The key to successful diversification is to select investments that behave differently than one another – or in mathematical terms, that generate returns which are “non-correlated.”

Asset allocation. Before recommending specific investments, most financial professionals will work with you to agree how to divide your investment dollars among equities, fixed income and cash. This approach is known as asset allocation.

Dollar-cost averaging. This is a time-tested technique that involves investing a preset amount on a regular schedule – such as every week, month, or six months. When prices are lower, your dollars buy a larger number of shares. When prices are higher, your dollars buy fewer shares.

Staying in the market. In principle, “timing the markets” is simple – you buy when investments are at their lowest point and sell when they are at a highest point. The trouble is that it’s next to impossible to consistently guess exactly when these things will happen. For this reason, many professionals advocate simply leaving your money invested for the longer term and riding out the cyclical ups and downs of the market.


The time to get going is now

Your financial advisor can help you understand the potential pros and cons of any particular investment vehicle, based on your individual situation. Time horizon, risk tolerance, income needs and tax considerations will factor into the development of a suitable strategy. Use our guidelines on all the basics to begin fueling your investment journey.

Related Literature

IMPORTANT INFORMATION: All investments involve risk, including loss of principal. Past performance is no guarantee of future results. Please see each product’s web page for specific details regarding investment objective, risks, performance and other important information. Review this information carefully before you make any investment decision.

Carefully consider a fund’s investment objectives, risks, charges and expenses before investing. Please view the prospectus or summary prospectus for this and other information. Read it carefully.

FINANCIAL ADVISORS: Please note that not all share classes may be available for sale at your firm. Please call the Legg Mason Sales Desk 1-800-822-5544 or your Legg Mason Sales contact for more information.

Asset allocation, diversification and dollar-cost averaging do not guarantee a profit or protect against investment loss.