How goal-based investments are taking a front seat in wealth management

In recent years, goal-based investing has emerged as a transformative approach to wealth management in India, gaining traction among investors seeking to align their financial strategies with personal aspirations. This method focuses on creating tailored investment plans that correspond to specific financial objectives, rather than merely pursuing market benchmarks or maximising returns.  Understanding goal-based investing  Goal-based investing, often referred to as goals-driven investing, is a strategy that links investment decisions directly to measurable financial goals. This approach recognises that different objectives—such as saving for a child's education, purchasing a home, or planning for retirement—have distinct time horizons and risk tolerances. By defining these goals clearly, investors can make informed decisions about asset allocation and risk management tailored to their individual circumstances.  “Goal-based investing helps bridge the persistent ‘returns gap’ — which is the difference between the returns delivered by an asset class and the actual returns an investor earns. Many investors overlook the fact that ‘why’ you invest is often more important than ‘where’ you invest,” said Mayank Bhatnagar, co-founder and COO, FinEdge (investment management company).  “This approach instils focus and resilience, helping investors stay the course despite market volatility. This also helps to break away from the traditional approach of a one-size-fits-all investment solution, overlooking an individual’s unique requirements, saving the investor from the ‘recommendation sales trap’,” Bhatnagar said.  To implement a successful goal-based investing strategy, experts suggest investors to follow several key steps:  Identifying financial goals: Investors must first articulate their short-term and long-term objectives. Common goals include saving for education, home purchases, or retirement.  Assessing risk tolerance: Understanding how much risk one can tolerate is crucial. For example, investments aimed at short-term goals may require safer assets like fixed deposits or bonds, while long-term goals could accommodate higher-risk equities.  Creating a diversified portfolio: Based on the identified goals and risk profiles, investors can construct diversified portfolios that optimise returns while minimising risks associated with each specific goal.  Regular monitoring and adjustment: Continuous tracking of progress towards these goals is essential. This allows investors to adjust their strategies as needed based on market conditions or changes in personal circumstances.  “Ultimately, the key to successful goal-based investing lies in partnering with a platform that combines technology with the expertise of investment experts — who co-own your financial goals and help you navigate market ups and downs with confidence,” Bhatnagar said.