Clichés aside, in any endeavour, it is of utmost importance to determine the final destination ahead of beginning. When pulling out of one’s home in a motor vehicle, it is said that to make optimal usage of petrol, the driver should carefully plot their route ahead of getting in the car.

The reasoning is simple, without an end result/goal in mind, the journey will become convoluted and may go on endlessly. The end result of that is usually wastage or missed opportunities.

In an investing world and, by extension, planet bearing violent undulations, it is of even greater importance for investors to determine ahead of time their ‘intention’ for the funds they are about to place. This will be helpful in times of market booms, or a bull market such as 2013 when the Standard & Poor’s 500 Index rose by more than 30 per cent, or a bear market such as the Jamaica Stock Exchange in 2014.

Having a goal in mind will help an investor more ably inform his or her financial advisor and this may allow for additional stocks to be bought in a bearish economy (buying ‘low’) or sold during a bullish period (selling ‘high’).

A goal-driven perspective, along with assumptions regarding the security purchased, should be the main drivers of any investment decision. For instance, it would be fair to assume that when purchasing a company, one expects it to remain a going concern (that is, continue in operation for the foreseeable future), have strong leadership with few changes to its executive management in the short term, have moderate revenue growth and cost containment in each earnings report.

Other factors considered include stability in their main country of operation. For example, Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) and Facebook Inc (NASDAQ:FB), despite being international in scope are domiciled in Brazil and the United States, respectively. Additionally, the price of the main product sold (and by extension, its inputs) is also a variable factor.

An example of this is how Alcoa Inc (NYSE:AA) — which participates in automotive and aerospace transportation, building and construction, consumer electronics and packaging, defence applications across air, land and sea, and other related areas — stands to be impacted by a swing upwards or downwards in the price of aluminium on the global commodities market.

An example of a goal set at the outset is ‘Investor J Doe is desirous of purchasing a second home and is placing US$7,500 with a four-year window within which to achieve this objective’. Now, assuming Ms Doe is investing in the equities market to take advantage of opportunities there, she may have purchased Apple (NASDAQ: AAPL) at US$46.67 in January 2011. Twenty months later, when AAPL hit a lifetime high of US$100.014 and the principal had increased by 98.35 per cent to $15,600, Ms Doe, being fully aware of her goal of hitting US$15,000 may have sold to take advantage of this spike in price and used the proceeds to buy her home. Mission accomplished, as she was being driven by her goal, more so than a market circumstance.

Similarly, Mr J Public, in investing in China Mobile (NYSE: CHL) on January 16, 2014 at US$50.17 per share, with an intention of achieving 15 per cent growth plus a dividend of five per cent, would have likely despaired upon seeing the price fall to US$41.55 on March 21, 2014, for a capital loss of 17 per cent in just over eight weeks.

Needless to say, in the absence of a target and an understanding of the fundamentals, Mr Public would have sold his stock in a panic in seeking to protect his principal. The unfortunate result of that course of action is that he would have missed the rebound to US$55.05 on July 24, 2014 and foregone the dividend of US$0.94 per share (annualised yield of 4.6 per cent) paid on May 22, 2014.

The benefits of his measured approach, in line with the objectives initially set, would have borne fruit for Mr Public.

The final component of beginning with an end in mind is frequent portfolio reviews undertaken with one’s financial advisor to assess the performance of the companies within one’s investment portfolio and whether the assumptions made at the time of purchase were materially impacted.

Investments are not made in isolation, nor are they static. With markets moving daily, and being impacted by events, both global and local (in the case of Jamaica), sound financial advice is critical to maximising portfolio gains and to mitigate risk. This most certainly affirms the views expressed by my esteemed colleague, Mr Noel Harty, in his submission to SSL’s ‘In the Money’ on Wednesday, July 23, 2014.

— Ryan Strachan is wealth manager at Stocks & Securities Ltd.