What is Goal-Based Investing?


What is Goal-Based Investing?

Goal-based investing in asset management is somewhat new to wealth management and differs from traditional investing in unique ways.The traditional investing philosophy focuses on portfolio construction to achieve the highest return

The goal-based investing philosophy focuses on attaining a specific goal first, then uses the portfolio construction as a tool to achieve the goal.

Purposed Based Investments

Each investment has a specific purpose in goal-based investing and is independently monitored. Also, the goal’s progress is monitored and the investment’s strategy revised as they get closer to meeting the goal. In this manner, the entire portfolio is not adjusted, only individual assets for specific goals. The philosophy behind this is that when the purpose of investing is for a specific thing, adjusting the strategy is often easier for the investor to monitor and understand. It also helps keep investors on track to meeting their goal. For example:

  • College funding- long term strategy – aggressive risk tolerance – adjust to the goal
  • Saving for a house- short term strategy – conservative risk tolerance – adjust to the goal
  • Saving for retirement- long term strategy – moderate risk tolerance – adjust to the goal

Goal-based investing measures success based on the client’s needs and goals and is adjusted depending on how well the client can meet the goal. It does not measure success by chasing high returns, putting the portfolio at risk and negatively impacting long-term performance.

How Financial Professionals use Goal-Based Investing

Using goal-based investing, financial professionals help guide investors through thoughtful advice to help them keep their goals in mind. Then advisors develop goal-oriented investment strategies and help investors avoid mistakes from reacting to the short-term performance of the markets. It is a process of monitoring and adjusting each investment one at a time. Therefore, goal-based investing is considered a more holistic approach to asset management.
Once the goals, time frame, and the amount required are clear, the next step is to work with your financial professional on an investment strategy to meet the goal. If you have questions about goal-based investing, contact our office.

SWG2043868-0222d The sources used to prepare this material are believed to be true, accurate and reliable, but are not guaranteed. This information is provided as general information and is not intended to be specific financial or tax guidance. When you access a link you are leaving our website and assume total responsibility for your use of the website you are linking to. We make no representation as to the completeness or accuracy of information provided at this website. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, websites, information and programs made available through this website.

At Lakeview Financial Solutions we truly enjoy helping people make smart financial decisions. In addition, we look forward to learning more about you, your priorities, and your goals. Contact us today to discuss your retirement strategy.