Goal-based investing

Goal Based Investing or Goal Driven Investing is an investment methodology where performance is measured by the success of investments in meeting an individual's personal and lifestyle goals. This differs from conventional investing methodologies, where financial performance is defined as a return against an investment benchmark. This approach results in focus of the investment approach shifting from achieving a higher returns approach to the investment, or exceeding the market returns approach to funding a personal financial goals approach. Goal Based Investing or Goal Driven Investing is an investment methodology where performance is measured by the success of investments in meeting an individual's personal and lifestyle goals. This differs from conventional investing methodologies, where financial performance is defined as a return against an investment benchmark. This approach results in focus of the investment approach shifting from achieving a higher returns approach to the investment, or exceeding the market returns approach to funding a personal financial goals approach. Goal Based Investing focuses on investing for a household based on their needs and goals, not on their risk tolerance. It is a similar approach to asset-liability management for insurance companies and liability-driven investment strategy for pension funds but integrates financial planning and investment management which insures that household goals are funded in an efficient manner. Goal Based investing approach has also been employed by university endowment funds in managing their investments In Goal Based Investing, the assets are the full set of resources the investor has available, including financial assets, real estate, employment income, social security, etc. while the liabilities are the financial liabilities such as loans, mortgages, etc. in addition to the capitalized value of the household's financial goals and aspirations. Goal Based Investing takes into account the progress against goals which are categorized as either essential needs, lifestyle wants or legacy aspirations depending on level of importance to an individual or family. It also helps to prevent rash investment decisions by providing a clear process for identifying goals and choosing investment strategies for those goals. These goals may include ability to put children in a good school, retiring early, and be able to afford a quality life after retirement.