We all have some or the other kind of goal that we want to achieve in our lives. It can be buying a house, buying a car, or saving for retirement. Whatever the goal may be, investing is a powerful way to help you reach it.
Goal-based investing is all about planning your investments keeping your goals and timeline in mind. Here the time horizon for your goal is pre-decided. This type of investment planning helps you stay focused on achieving your goals and also keeps you from making impulsive decisions with your money.
Understanding Goal-Based Investing
Goal-based investing differs from traditional investing, where the emphasis is on how well an investor is able to meet his or her personal life goals, rather than how well his or her investments perform against the market average in a given period.
For example, if you have a short-term goal of saving for a down payment on a house in 3 years, you would invest differently than if you had a long-term goal of saving for retirement 30 years from now.
What strategy works best for Goal-Based Investing?
Goal-based investors have two primary strategies to choose from:
1. Asset Allocation Strategy
Asset allocation is the process of dividing your investment money into different asset categories, such as stocks, bonds, cash, real estate, and commodities. The goal of this strategy is to create a mix of assets that will provide the best opportunity for capital growth while minimizing risk.
2. Goal-Based Investment Strategy
A goal-based investment strategy focuses on buying specific investments that are intended to help you reach a particular goal. This type of strategy requires more ongoing maintenance than the asset allocation approach but can be more tax-efficient and easier to understand.
Which one is better for me?
There is no single “right ” answer when it comes to choosing an investment strategy. The best approach for you will depend on your goals, time horizon, and comfort level with risk.
If you want a hands-off investment approach that will provide the potential for capital growth over time, the asset allocation strategy may be a good fit for you.
If you are comfortable making ongoing decisions about your investments and are willing to take on more risk in order to potentially achieve higher returns, the goal-based investment strategy may be a better option.
Benefits of goal-based investing
There are several benefits to goal-based investing:
It can help you stay focused and disciplined with your investments: When you have a specific goal in mind, it can be easier to stay focused on your investment plan and resist the temptation to make impulsive decisions with your money.
It can help you become a better investor: Learning how to invest for a specific goal can teach you valuable lessons about investing that you can apply to other areas of your life.
It can be easier to understand than traditional investing: With a goal-based investment strategy, you are buying specific investments that are intended to help you reach a particular goal. This type of investing can be less complex and more transparent than traditional investing.
It can be more tax-efficient than traditional investment approaches: Depending on the types of investments you hold and the goals you are trying to reach, goal-based investing can be more tax-efficient than traditional investment strategies.
Helps you to rebalance your portfolio: When you have specific financial goals, it can be helpful to periodically rebalance your investment portfolio to ensure that you are still on track to reach those goals.
Helps you pick the right investment products: If you want to invest in specific financial products, such as mutual funds or exchange-traded funds, goal-based investing can help you choose the right ones for your goals.
How can you manage your goal-based investing with Finzard?
Finzard has recently collaborated with Smallcase, which aims to enhance your goal-based investing experience. With Finzard, you can start planning your short term and long term goals, while leveraging the goal-based investing tools and solutions by Smallcase. It will help you allocate money towards specific goals that you may want to achieve in a predefined year — which may be a few years from now.
Smallcase is dynamic and is built using ETFs that are weighted intelligently between equity, gold, cash and bonds. Investors like you can enjoy achieving your financial goals every year by using smallcase with Finzard. It’s the easy, effective and smartest way to meet your money goals in no time.
Key Characteristics
The same investment objective for common timelines:
Different investors can invest in the same small case if your target year is the same.
The flexibility of investments:
When you are investing for your goals, you can allocate your funds to different smallcases for growing your investments a bit extra!
Wealth maximization in initial years:
The feature gives ideal avenues for growing your wealth and investments.
Take control of your Personal Finance Planning and Wealth Management, Download and Install Finzard — Your Personal Financial Wizard from Google Playstore or shoot your questions on pr@finzard.com.
For more information: www.finzard.com
Written by Gouri Chowbey for Finzard
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