Goals-based investing: Why it’s good for financial planning

Publish date January 16, 2019

Have you ever heard of goals-based investing? It’s all the buzz in the financial services industry, but what is it and how do you know if it’s right for your financial planning? 

Let’s look at the basics of what goals-based investing is and how it can help you.

What is goals-based investing? 

The objective of goals-based investing is all about helping you, the investor, reach your goals. It sounds like an obvious concept, and you’re probably thinking, “How is it different from what I’m doing right now?” 

The trend towards goals-based investing represents a shift in the way you may have thought of investing and how your portfolio was designed.  Each account may have had its own goal, with portfolios heavily shaped by your risk profile. 

Sure, you may get a positive return, but does it matter if you can’t ultimately achieve your goal of buying a house or saving for retirement? When you’re working so hard to save and invest your money, it’s important that your investments are also working hard to help you live the life you dream of.

You and your investment representative can work together to follow your progress over time, making sure that whether your money is invested through a Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP), you’re on track for your goals.

What are you saving for?

With the goals-based investing approach, you’re in the driver’s seat of your own investment strategy. Success is measured by whether your portfolio is on track to meet your unique goals and needs. These milestones can be short-term, like buying a new car, or long-term, such as buying a vacation home.

This is helpful because you can be actively involved in building your own investment strategy with your advisor, which is closely aligned with your life goals after all. With this new perspective, you may be more steady with your approach and less likely to overreact to market fluctuations. 

Investing based on your goals also considers the amount of time to achieve them, along with how risky the investments can be. Saving for a short-term goal, such as a vacation in a few months, might involve more risky investments than saving for a home in 10 years. 

Good tools also help you understand more about the investments you and your investment representative are making, and how they will help you achieve your goals given your timelines.

How do I start?

Start thinking about your life goals and write them down. You can talk about it with your partner, family or close friends. Not sure about where to start? Consider some common financial goals:  

•     When do you want to retire and what type of lifestyle do you want? 

•     Are you planning any large purchases, like a home, a car or a vacation? 

•     What about saving for education, whether it’s for yourself, your children or grandchildren? 

Your life goals are unique to you, and there’s no reason why your investment strategy should be any different. Goals-based investing can significantly help to increase the chance of reaching your financial goals. 

An investment representative can help guide you in this journey and answer any questions you may have.