Most investors tend to go through the same process. They log into their investing app and see one figure: returns.

If the figure is a positive number, they feel satisfied.  If the figure is negative, then they start doubting their choices.

However, returns alone cannot help in knowing whether one is really moving forward.

Each investment is made to meet some financial objective, and that objective is the one which shows whether an investor is moving in the right direction.

Returns mean nothing without context

Consider two investors. Investor A needs ₹20 lakhs in five years to purchase a house. Investor B needs ₹5 crores for retirement after 30 years.

Assume that both investors have earned 12% in one year. Does that mean both of them are equally successful?

Investor A might actually lag behind if the investment value is insufficient to achieve ₹20 lakhs in five years. In the case of Investor B, he might actually be ahead of his goal by a fair margin.

The same return actually says something entirely different because of the destination factor.

Your goal decides what progress looks like

Each investment objective helps answer three essential questions:

• How much money is required?
• When do I need it?
• What risk am I willing to take?

And these become the benchmarks by which progress is judged.

For instance, if your child’s education is ten years down the road, a market correction is not an issue and no action may be required.

If, on the other hand, you need the same money next year, then safeguarding the money becomes more important than earning better returns.

This is why progress must always be determined on the basis of the goal, not according to market headlines.

Focus on the gap, not just the growth

Achieving your financial objective is not only about seeing your money grow. It is about gauging how close you are to your financial objective.

For instance, if your financial target is ₹30 lakh, then saving ₹18 lakh makes you closer to it compared to someone who has ₹10 lakh, even if both portfolios experienced the same percentage increase for the current year.

Determining how much you have succeeded in and how much remains to be achieved will give you a better idea of where you stand.

If there is more of a gap than anticipated, you could revise your monthly investment or relook at your plans.

The SIP return calculator can assist you in determining whether your investment is adequate to achieve your target.

Short-term performance can be misleading

A temporary drop does not necessarily mean that you have fallen short of your investment objective.

Instead of panicking with each change in the market, ask yourself:

• Am I contributing enough every month?
• Am I on course to achieve my target figure?
• Have my objectives or deadlines changed?
• Is my portfolio in line with my objectives?

These questions paint a far more accurate picture than monitoring weekly returns.

Review your plan, not just your portfolio

Assessment of your progress includes not only assessment of your gains. When your objective shifts from creating wealth to earning an income, then your measurement of progress will change too.

A SIP goal calculator can help to determine the capital needed to achieve your goal in the desired timeline.

Final thoughts

Investing successfully is not about getting the best return on your money each year. It’s about meeting the financial objectives that you have defined within the specified period of time and with the tolerable amount of risk involved.

When you make the goal of your investment your benchmark, you do not react to every fluctuation in the markets but evaluate your progress more objectively.

This results in better decision-making, reduces emotions, and increases your chances of attaining what you invest for.