What approach does Goals-Based Investing prioritize?

Goals-Based Investing prioritizes matching assets with liabilities based on risk-reward and time horizon. This investment strategy focuses on understanding the specific goals of the investor, such as saving for retirement, purchasing a home, or funding education, and aligns investment decisions to meet those goals.

By considering the time horizon for each goal, the investor can select appropriate assets that will help achieve these objectives while managing risk effectively. This approach emphasizes that different financial goals may require different investment strategies, thus allowing for a more personalized and effective investment portfolio that meets the unique needs of the investor.

In contrast to maximizing short-term profits or minimizing transaction costs, which focus on specific aspects of investing, Goals-Based Investing encompasses a broader view that accounts for the entire financial picture and the individual’s life goals. Investing without a strategic plan undermines the core principles of Goals-Based Investing since it does not take into consideration the individual’s specific needs and timelines, potentially leading to unfocused investment choices.