What is a core principle of Goals-Based Investing?

What is a core principle of Goals-Based Investing?

• A. Investing in a broad market index
• B. Allocating a specific amount of assets to meet documented client goals
• C. Focusing exclusively on high-yield bonds
• D. Concentrating all assets in one fund

Answer: (B)

The core principle of Goals-Based Investing is centered around the idea of intentional asset allocation to meet specific financial goals that are documented for a client. This approach emphasizes understanding the individual client's priorities, needs, and objectives and then tailoring the investment strategy accordingly. It allows investors to focus on achieving particular outcomes, like saving for retirement, buying a home, or funding education, rather than solely concentrating on overall market performance or specific asset classes. By allocating a specific amount of assets strategically to meet these goals, the investor can ensure that their portfolio is aligned with their life ambitions and financial objectives, enabling more focused and perhaps less volatile investment decisions. This goal-oriented strategy helps in mitigating risks since the investments are aligned with the time horizon and risk tolerance of the specific goals.

The core principle of Goals-Based Investing is centered around the idea of intentional asset allocation to meet specific financial goals that are documented for a client. This approach emphasizes understanding the individual client's priorities, needs, and objectives and then tailoring the investment strategy accordingly. It allows investors to focus on achieving particular outcomes, like saving for retirement, buying a home, or funding education, rather than solely concentrating on overall market performance or specific asset classes.

By allocating a specific amount of assets strategically to meet these goals, the investor can ensure that their portfolio is aligned with their life ambitions and financial objectives, enabling more focused and perhaps less volatile investment decisions. This goal-oriented strategy helps in mitigating risks since the investments are aligned with the time horizon and risk tolerance of the specific goals.