Goals-Based Investing: An Overview
To most savers, money is a means to an end. Yet the shift from defined-benefit pensions to self-directed 401(k) programs thrust Americans head first into the investment markets. Nowadays, the process of saving and investing is equivalent to shopping at a complex financial grocery store. A better approach is goals-based investing. By matching investment time horizons with an investor's cash flow needs, goals-based investing insulates your emotions and lifestyles from the vagaries of the market. This approach sets the goals as the objectives and works backward to build an optimal portfolio allocation for each of them.