The goal setting process is one of the fundamental principles behind the Fabian Compounding Plan. It's what makes the
investor more important than the investment.
Here is the simple process that Dick Fabian outlines in his book, "The Mutual
Fund Wealthbuilder". The process is very simple and requires answering only four questions. Dick refers to this
as the "4 Hows." It is very important that the questions be answered in the sequence they are presented.
How 1: How much money do you want to accumulate?
This needs to be a specific monetary goal. One that is important to you. Give it some real thought. This
is your monetary goal.
How 2: How much time do you have?
Do you want to attain your goal in 1 year, 5 years, 20 years or longer? The path you will follow to reach your monetary
goal will depend on how much time you have.
How 3: How much money do you have available to work with?
How much do you have today and how much will you be able to add over time or in the future? We are talking about your
serious money here, not just your play money.
How 4: How are you going to put your investment money to work?
Dick Fabian believs this is the least important of the four. For many, it is the only question they ask when setting
goals. This is your investment goal.
The Fabian investment goal is to strive for 20% annualized compounded growth on your personal investments over the long
term. When Dick Fabian speaks of the long term, he means the rest of your life.
How can we hope to get 20%? We actively manage our investments.
When the market says buy, we become fully invested. We only purchase high momentum funds, no cash and no bond
funds.
When the market says sell, we move into the safety of cash, or money market funds. We then preserve our capitol for future
growth, not just making up for what we had lost.
