The goals-based investing framework is designed to maximize the probability of achieving our goals. This is a different objective than “maximizing our portfolio return” or “minimizing portfolio risk” and requires that we explicitly define, quantify, and prioritize our goals for all years in our investment time horizon. Once our goals are organized by priority and time horizon, we can then start to assign specific assets or groups of assets to fund particular goals, in essence creating “sub-portfolios,” each of which is designed to fund a personal financial goal.
In general, short-term and high-priority goals ought to be funded with lower-volatility, liquid investments, while longer-term or lower-priority goals can be funded with higher-volatility and illiquid investments. But in a market environment wherein publicly traded equities are trading at very elevated multiples and fixed income investments offer exceptionally low yields, how do we adapt this framework to maintain our path toward goal achievement? This podcast suggests a “barbell” approach which helps maximize the probability of achieving long-term goals and is underpinned by careful cashflow planning, monitoring, and rebalancing.
- Speaker: Jack Parham – Chief Investment Advisor, Eton Advisors Group
- Host: Greg Dixon – Marketing Consultant, Eton Advisors Group