What’s Inside This Issue
Every investment decision starts with a question: what is this money meant to do? This fall’s newsletter from Locker Financial Services helps answer it. We cover investment objectives, bond basics, good debt, and planning for families caring for two generations at once. Together, these topics show how clear goals lead to a more confident financial life.
Objectives Help Focus Investing
Broadly speaking, a few main investment objectives can guide your investing. Understanding them matters. Certain strategies and products may suit one type of goal but not another. Below is an overview of the main objectives and how to set your own.
Capital Appreciation
Capital appreciation is an objective for long-term growth. If retirement savings is one of your goals, the strategy would most likely involve a qualified retirement plan. There, your investments have many years to work.
This objective isn’t limited to retirement plans. It can also mean building wealth over many years. With a capital appreciation objective, you need confidence that your portfolio will grow over time. That means not worrying about day-to-day market fluctuations.
Still, monitor the companies you invest in. Watch for changes that could affect your long-term growth. Rebalance your portfolio if it strays from your current asset allocation strategy.
Current Income
If your objective is current income, you would most likely invest in stocks with consistently high dividends. Highly rated bonds are another common choice. Many people pursuing current income are retired and use it for living expenses. Others use it for specific needs, such as a college education. The interest covers those costs without touching the principal.
Capital Preservation
This objective typically fits someone who wants to make sure they don’t outlive their money. Think of a retiree concerned they won’t have time to recoup losses from a bad investment. For this goal, security matters most, even if it means giving up return.
A capital preservation strategy might include bank certificates of deposit, U.S. Treasury issues, and savings accounts. It may also include fixed income bonds, such as municipal, government, and corporate bonds.
How to Set Your Own Goals
Most experts agree that goal-based investing is the best approach to reaching investment goals. You set investment goals based on specific life goals. Examples include buying a home, saving for a child’s education, or saving for retirement. Consider each goal individually. Then set a time horizon and risk level for each one. This lets you build a strategy designed to help you reach it.
To gauge your comfort with risk and your time horizon, ask yourself these questions:
- What is your intent for investing this money?
- When would you like to withdraw your money?
- Do you want substantial capital growth by the time you withdraw, or do you want to maintain the principal value?
- What is the maximum decline in your portfolio’s value you are comfortable with?
Setting Your Goals
Once you understand why you’re investing, get specific. Your investment objectives are the foundation of your investment plan. Don’t take them lightly. Your goals might include saving for retirement, buying a home, or starting a business. They could also include saving for a child’s education, taking a special vacation, or buying a vacation home.
There are many ways to set goals. One of the best is the SMART format:
- Specific: make each goal clear and precise
- Measurable: define goals you can measure
- Achievable: keep each goal realistic
- Relevant: make sure the goals relate to your life
- Time-based: assign a time frame so you can track progress and know when you’ve arrived
Next, set a time frame for each goal. You won’t reach every goal at once. Group them into short, medium, and long term. Then assign a specific number of months or years to each.
The final step is setting a dollar figure for each goal. Some goals are easier to price than others. For larger, longer-term goals like retirement, education, or starting a business, research what each could cost.
Clearly defined goals make it much easier to build an investment plan. They also help you create a budget that includes your savings goals. Learn more about our asset management and investment services.
Consider Maturity Dates
Bonds come with maturity dates ranging from several weeks to several decades. Before choosing one, review how that date affects investment risk and your ability to pursue your goals. Yield typically increases as maturity lengthens. That’s because you assume more risk by holding a bond longer.
Two fundamental concepts apply to bond investing.
Interest Rates and Bond Prices Move in Opposite Directions
A bond’s price rises when interest rates fall. It declines when interest rates rise. An existing bond’s price must adjust to offer the same yield to maturity as an equivalent, newly issued bond.
Longer Maturities Feel Rate Changes More
Long-term bonds carry a longer stream of interest payments that don’t match current rates. As a result, their prices must change more to compensate for a rate change.
You can’t control interest rate changes. However, you can limit their effects. One way is choosing bonds with maturity dates close to when you need your principal.
Myths About Bonds
Bonds are a core part of many investment portfolios. Yet they aren’t always well understood. Several common myths persist, and following them could lead to poor investment decisions. Here are a few worth clearing up.
Myth 1: Bonds Are a Risk-Free Investment
Bonds are less risky than some investments, such as stocks or real estate. But less risk doesn’t mean no risk. A bond issuer may default, which could leave investors without their principal.
Some bonds are also riskier than others. Treasury bonds are guaranteed by the U.S. government and carry relatively little risk. The U.S. has never defaulted on its debt obligations. Corporate bonds, issued by companies, are generally riskier than government bonds.
A bond’s rating gives you an idea of its relative risk. Ratings are often expressed as letter grades. A triple-A rating means the issuer is extremely likely to meet its commitments. A C rating means the issuer is vulnerable.
Myth 2: Lower Returns Mean Bonds Aren’t Worth It
Bonds may not be as glamorous as stocks, but they still have a place in many portfolios. They add diversification. A stock-heavy portfolio can earn strong returns. It can also lose a lot of money quickly if the market drops. Stocks may eventually regain their losses. But if you need money in the meantime, you’ll need other resources.
Bonds can also provide a steady income stream. That may appeal to anyone who wants to live off investment income. They offer a way to preserve capital while still earning some return.
Certain bonds also offer tax advantages. For example, municipal bond income is generally free of federal income tax. Sometimes it’s free of state and local income taxes, too.
Myth 3: Bonds and Bond Funds Are Essentially the Same
Not exactly. The difference resembles the difference between stocks and mutual funds. With a bond fund, a professional investment manager chooses a range of bond investments on your behalf. With an individual bond, you own a single bond and hold it until maturity.
Individual bonds pay fixed amounts, often semi-annually or quarterly. If you hold the bond to maturity, you get your original investment back. Bond funds, by contrast, have fluctuating income based on how the underlying bonds perform.
Bond funds are more liquid than individual bonds, though. That makes them easier to sell if you need cash. Diversifying with individual bonds also requires buying a wider array of them. The right choice depends on your goals, your comfort with investing, and other factors.
Myth 4: All Bonds Are Safe Investments
No investment comes with guarantees. There’s always risk. Bonds are generally considered less risky than stocks, but some carry more risk than others.
Bonds issued by the U.S. federal government, such as savings bonds or Treasury bonds, carry minimal risk. Similar bonds from a less stable country or government could carry much more. State and local bonds, called munis, carry a greater risk of default than U.S. federal bonds. Corporate bonds can be risky as well, especially so-called junk bonds.
Is There Good Debt?
Good debt finances something that can increase your income or net worth. Bad debt does the opposite. Here are some examples of good debt.
Education
A loan for college or technical training is an investment in your future. Over a lifetime, the return on an education will likely reach hundreds of thousands of dollars.
Owning a Business
Entrepreneurs can turn a small business loan into a successful venture.
Purchasing Real Estate
Real estate offers several ways to build wealth. The most common is taking a mortgage on a home, living there for many years, then selling at a profit. Renting out a home or apartment is also good debt that can generate ongoing income. Commercial real estate, such as an office building, store, or industrial park, can return good profits and capital gains.
Tips for the Sandwich Generation
If you care for young children and aging parents at the same time, you’re part of the sandwich generation. A financial plan covering your parents, your children, and yourself can help you manage the challenges ahead.
Build a Retirement Income Plan for Your Parents
Now is the time for a serious money conversation with your parents. Learn their wishes for medical treatment and long-term care. Also find out if they have adequate retirement income. A retirement income plan helps them avoid spending too much too soon. That way, they can cover their expenses throughout retirement. Explore our retirement planning services.
Research Long-Term Care Options
Research ways to pay for long-term care in case your parents need it. Long-term care insurance is one option. However, it’s expensive and may be hard to qualify for with certain medical conditions. Parents who are healthy and relatively young may want to consider a policy before it becomes cost-prohibitive.
Prepare an Estate Plan
If your parents don’t have an estate plan, it’s time to create one so their wishes are met. Help them through the process, or find someone who can. A complete plan includes a will, trust, and advance health care directives. It also includes medical and durable powers of attorney.
Inventory Assets
Help organize your parents’ finances by locating all important documents. These include financial accounts, retirement accounts, wills, trusts, and medical directives. Don’t forget powers of attorney and digital assets.
Develop a College Savings Plan
As your focus shifts from your parents to your children, start with their largest expense: college. Beyond saving, help your children plan for life after high school.
Your Turn
Caring for two generations leaves little time for your own planning. Creating a financial plan with short- and long-term goals can give you peace of mind. Once it’s in place, you may find more time for your other priorities. Learn more about our fee-only financial planning services.
Financial Thoughts
A Harris Poll found that 64% of six-figure earners now describe their income as “survival mode, not wealth.” Goldman Sachs found that 41% of households earning $300,000 to $500,000 live paycheck to paycheck. A majority of Americans say they’d need to earn $520,000 a year to feel rich.
Americans now expect to need an average of $1.46 million to retire on their own terms. That’s up $200,000 from a year ago, according to a new Northwestern Mutual survey. The 2026 survey identified Gen X as the generation most anxious about retirement. Among Gen X respondents, 51% don’t expect to be financially prepared. Another 20% say they’ve already delayed retirement due to financial challenges or other concerns.
In 2024, 31% of American families were upper middle class, compared with just 10% in 1979. One report defined upper middle class as a family of three earning $133,000 to $400,000 in 2024 dollars. That’s five to 15 times the federal poverty line. Meanwhile, the share of households living in or near poverty fell from almost 30% in 1979 to below 19% in 2024.
Ready to Talk Through Any of These Topics?
Investment objectives, bond choices, debt, and family planning all connect. Each decision affects the others. That’s why Locker Financial Services takes a comprehensive approach to every client relationship.
Lauren Locker, CFP® and Andrew Chan, CFP®, CIMA® can help you build a plan that brings it all together. Our firm is fee-only and fully fiduciary. Our advice is always in your best interest, never tied to a product or commission.
Call 973-256-2555 or Contact Us To Speak With A Fee-Only Financial Planner
Some articles in this newsletter were prepared by Integrated Concepts, a separate, nonaffiliated business entity. This newsletter intends to offer factual and up-to-date information on the aspects discussed, but should not be regarded as complete or accurate. Professional advisors should be consulted before implementing any options presente