Posted in Financial Gyan

Goals Based Investing

“Goal Based Investing” though a relatively new concept in the world of investing, is catching the fancy of many investors due to its various benefits. (And we are going to learn about them soon.) Once you learn more about this concept it seems more like common sense. (But common sense is quite uncommon) – so let’s learn a little bit more about this investing concept.

As the name says, in Goal based investing, you invest in specific goals such as your kids education, a vacation in Europe or saving for the dream house rather than generic investment and focusing on generating the highest possible return or beating the market. To start with you are required to list out your financial goals that you want to achieve. And then design an investment strategy that enables you to accomplish these goals in the best possible manner.

Most traditional investment frameworks start with assessing your risk taking ability  – Conservative, Moderate or Aggressive.  Then they use various indexes to show whether you will be able to beat the market but it does not specify whether you will be able to reach your financial goals.

Advantages of Goal based investing – 

  • Greater commitment of the investor as he is saving towards his own goals and he is able to track his progress 
  • Reduces chances of impulsive decision making due to sudden market fluctuations or availability of spare funds
  • Investor can relate to the entire process as it directly relates to a set of tangible goals 
  • Encourages a disciplined way of investing – whenever the person has some spare funds he is more likely to channel it to his current goals rather than get carried away by the sales pitch of some financial advisor
  • Helps have peace of mind w.r.t investing as he watches his investments grow

Also I have seen most investors struggle with the question of “When to book profits on investments?” In the absence of defined goals, it becomes very difficult to stay invested during market volatility or get carried away due to greed during a bull run. However when you are following a goal based investing approach, the process takes care of this dilemma. You book profit when a goal is attained. Period.


I am a software consultant by profession and reside in Hyderabad, India. I love to travel, listen to music, cook and make friends.

Do share your thoughts on this post...