Goals-Based Investing

When investing, every investor has an objective in mind. Usually, this objective differs for each investor based on several factors. These factors may include an investor’s time horizon, funds available, risk tolerance, etc. Based on each investor’s objective, the investment strategy will differ. One of the strategies that investors can use for this purpose is a goals-based investing strategy.

What is Goals-Based Investing?

Goals-based investing (GBI) is a term used to describe an investment strategy that relates to investors’ objectives. As mentioned, each investor will have different investing goals, and, therefore, this strategy will vary accordingly. Investors can link their income and investments with an objective that will seek to streamline their investing strategy.

Investors can use goals-based investing to achieve their life or financial goals. They can also hire a wealth manager to take care of their investments based on the defined objectives. With this investing strategy, investors do not usually focus on wealth maximization unless that is their goal. Instead, GBI works towards achieving the specific goals or objectives that investors have.

How does Goals-Based Investing work?

Goals-based investing does not work similarly to other investing strategies. As mentioned, most other investing strategies focus on maximizing the investor’s wealth. Instead, GBI seeks to meet a defined goal. In most circumstances, this goal will be a personal or financial goal that investors seek to achieve. Therefore, most techniques used in other investment strategies may not apply to GBI.

With goals-based investing, the benchmark for success also differs. This benchmark tracks how well the investor or manager achieves the objectives for the investment. GBI also allows investors to pursue several goals. On top of that, it can help investors rank or prioritize specific objectives over others. For example, goals-based investing may be a feasible option for parents who want to put their kids through college.

How can investors use Goal-Based Investing?

There are several steps involved in using goal-based investing for investment needs. The first step during the process is for investors to establish the funds needed for the objective. Similarly, they need to determine the time frame for the goal. These goals can be short-, medium- or long-term. Based on both these factors, investors can establish their investment requirements.

Once investors establish the timeframe and fund requirements, they must estimate the present cost. As mentioned, investors should have an idea of this cost based on their calculations. However, they will also need to adjust it for any expected changes, such as inflation. Once they do so, investors must also measure their future costs. This process may require them to speculate or predict future outcomes. All of these steps need to be accurate to provide the best results.

Based on all this information, investors can start investing through a goal-based investing strategy. Investors can then start making contributions to their plan through their income or savings. Similarly, they will need to choose the right investments that can help them achieve their goals. Practically, it may require investors to choose various investments to reach their objectives.


For most investors, the primary goal of investing is wealth maximization. However, some investors may also have other objectives in mind. For that, they can use a goal-based investing strategy. GBI is an investment strategy that focuses on achieving investors’ goals. There are several steps involved in ensuring this strategy provides the maximum benefits for users.

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