What is goal based investments

What is goal based investments?

A relatively new approach to wealth management that emphasizes investing with the objective of attaining specific life goals. It involves clients measuring their progress towards the specific life goals such as saving for children’s education or building a retirement nest-egg, rather than focusing on generating the highest possible return or beating the market

Consider an investor who is looking forward to retirement within a year, and who therefore cannot afford to lose even 10% of his or her portfolio. If the stock market plunges 30% in a given year and the investor’s portfolio is down “only” 20%, the fact that the portfolio has outperformed the market by 10 percentage points would offer no comfort.

Goal-based investing involves appropriate asset allocation strategy that is tailored to the client’s specific goals. Thus, if a client’s main goals are to save for down-payment towards purchase of a home in a couple of years and fund the college education of her toddler children, the investment strategy would be more conservative for the former and relatively aggressive for the latter.