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Goal-based Investing Explained

Date: 7th March 2019

Although it might be tempting to think that investing is just about getting the best possible return on one pot of money, goal-based investing, structuring your investment around your specific financial aims, has become a widely-used way of helping people plan their financial futures.

Thinking things through
One of the most significant benefits to a goal-based approach is that it encourages us to think about what we want our money to achieve in a tangible way, across a range of time horizons. No two investors have the same financial aims, and meeting different goals means using a variety of investment strategies.

This approach starts with the investor defining their objectives such as saving for school fees, a child’s wedding, a deposit on a home, a comfortable retirement. These goals then become the building blocks of an investment plan. The information gathered is used to define the right level of savings and the most appropriate mix of funds to Goal-based investing explained meet the investor’s goals and will also take account of all available annual allowances and employ taxation saving strategies too.

For instance, a retired couple might typically want an income stream now to boost their pension, but also want to invest some of their capital to fund the likelihood of care costs later in life. In this instance, a portfolio can be tailored to meet each specific goal.

A younger investor may want to structure their investments to cover school fees from nursery to graduation for their children, whilst at the same time building up a substantial pension pot for retirement.

Gauging your attitude to risk
Being clear about your goals will make it easier for us to tailor your risk profile to different investments. Each goal may have its own risk tolerance and time horizon. Naturally, over time your goals may change as your life and circumstances change, and your attitude to risk may alter too, that’s why we always recommend regular reviews.