Investing Should Be Goal-based

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    The traditional product-centric approach to investing, which focuses on allocating more or less to stocks and bonds as a function of some estimated risk-aversion parametre, needs to be replaced by a goal-based investor-centric approach to wealth management, says the EDHEC-Risk Institute. In particular, an investment framework based on risk-aversion, a crude one-dimensional summary of the complex set of investors’ meaningful objectives, cannot ensure that any particular goal that is essential to the investor can be achieved with certainty. In contrast, goal-based investing is a novel investment solution framework dedicated to allowing investors to secure their essential goals, while maximizing the probabilities of reaching their otherwise meaningful goals that cannot be secured with full probability given their dollar and risk budgets.