Financial Education

Goal Based Investing - how to succeed with big savings goals

February 15, 2023
Goal Based Investing - how to succeed with big savings goals
Goal Based Investing ensures that you can reach your savings goals faster as you keep the end goal in mind. How does Goal Based Investing work? How it differs from traditional investment methods? What are the advantages? You will find all the answers in this article.

Differences between Goal Based Investing and traditional investment methods

Traditional investing and Goal Based Investing differ in their approach and goal. Traditional investing tends to focus on the basic maximization of return, without a fixed destination in mind. In most cases, this involves a broad portfolio with a long-term perspective, based on market expectations 1) and available capital. Goal Based Investing, on the other hand, is more suitable for investors who have a more narrow time horizon and a fixed idea of their financial goal. The focus here is on balancing risk and return, as well as how much capital is needed and when. The idea here is to invest money in different assets such as stocks, bonds and tangible assets (real estate, gold) in order to use and grow it so that it will be available to you at a certain point in time for larger saving goals, such as buying a condominium or retirement planning. However, this is not just theory, but an effective strategy for achieving your financial goals.

A Target to aim at can help you achieve your Goals thats what makes Goal Based Investing special

What's so special about goal-based investing?

Research consistently shows that people who clearly define their goals achieve them faster. This also applies to Goal Based Investing. With a concrete idea of what you want to achieve and the amount of money you need to achieve it, Goal Driven Investing makes it much easier to track your progress and keep you motivated. Each step that brings you closer to your dream increases your confidence and helps avoid distractions and unhelpful priorities. Many want to achieve their savings goals without cutting back on their current lifestyle. The assistance of a financial advisor for Goal Based Investing helps set realistic steps and goals. With the help of set investment strategies, it's easier to stick with it, even when the process gets tough.

What are the advantages of Goal Based Investing?

Most of us have wishes that are not easily reconciled with our monthly income. Many have been hoping for years to win the big lottery prize that will help them go on a cruise or buy a new apartment. Others try to make larger purchases by saving. Savings accounts have become more attractive again for many people due to the rise in interest rates. But savers do not always succeed in realizing their savings goals. Increased inflation contributes to the fact that the money in the account increases quantitatively, but the purchasing power nevertheless decreases from year to year. There is also often a lack of clear objectives regarding the financial resources required for the big wish. These are an essential basis for the time horizon of the investment. With concrete goals in mind, it's easier to decide whether spending and priorities will serve your savings goals. Planning the steps you need to take are also often a hurdle. Identifying and implementing these steps are the focus of Goal Based Investing, an investment strategy that specifically targets your wishes and dreams. Goal Based Investing is based on your individual goals and specific needs.

If the heart's desire is to be financed exclusively through savings and interest, it is necessary to save for a long time. If the required amount of money is divided by the number of months planned for saving, there is often a frighteningly high amount that has to be set aside each month. In most cases, there is not enough left over from the salary for this after deducting all current obligations. This leads to frustration for many people and to them giving up on their goals prematurely. With the motto "I can't do that", they prefer to bake small rolls or hope in vain for a lottery win. Goal Driven Investing helps set a realistic timeline for your personal savings goals. In doing so, the investment strategy is based on your individual needs. For example, if you want to buy a condominium within five years, the investment portfolio will be based on the amount of equity you want and the time period you define. 

Achieving savings goals through a longer-term investment horizon

Savers often shy away from investing in stocks because the prices of securities or exchange-traded funds (EFTs) fluctuate 2) and they fear losing money. Many factors, which are not always predictable, influence the development of stock market prices and cause security prices to rise or fall. Supply and demand have an impact on the price of stocks, as do economic uncertainty or unforeseen political events. While the volatility of securities fundamentally poses a risk of price losses, it also provides the opportunity for high price gains. No risk, no gain - that's often the saying in the financial world. If you can only invest your money for a short period because it is needed at a certain time, you may have to sell your portfolio at a low price and make losses. It is better to have a mix of short- and long-term investments. In addition to investment duration, the right strategy includes spreading risk through diversification. This involves investing in different asset classes such as stocks, bonds or real assets (real estate, gold) to limit the risk in case an investment performs poorly in the short term.

Maybe your saving goal is to travel around the world

Risk and Investment Horizon in Goal Based Investing

Most individual investors want to earn a good return while taking as little risk as possible. Those who want to grow their money to generate a certain amount within a defined time period expect the money to be available at the end of that time. A good advisor will therefore first clarify your investment behavior for Goal Based Investing in a conversation and ask whether you are more safety-oriented or willing to take risks. Conservative investors with a low willingness to take risks rely mainly on safe investments such as fixed-term deposits or government bonds. Defensive investors are willing to take moderate risks and prefer investments that can generate higher returns while still offering a certain degree of security. These include classic equities that are not dependent on the economic cycle 3). The offensive money investors hope for high profit and also like to invest risk-oriented, for example in futures, venture capital or cryptocurrency. Your personal self-assessment to the advisor serves as a guideline for him, and he will invest your assets at any time only in a way that corresponds to your individual risk tolerance.

How you can benefit from a financial advisor

Most people feel insecure and often make money decisions "on instinct." As a result, they may take on too much risk or buy or sell at an inopportune time. Financial decisions require extensive knowledge and financial literacy regarding investment options or economic relationships. A wise financial strategy requires long-term and comprehensive exposure to the financial markets. Few private investors have the time to take care of their investments and their finances on a permanent basis, but you can acquire more confidence in handling your finances through our educational content in a clearly understandable and informative way. The best way is to subscribe to our weekly market report on markets and finance, so you gradually build a solid knowledge base. When financial markets suddenly fluctuate, professionals can better assess what this means for investing. If you want to make the best decisions for your financial situation, contact one of our financial advisors for help.  Learn more about how you can unmask a dubious financial advisor.

How can financial advice help with goal-based investing?

The art of goal-based saving is to grow your money so that you can fulfill your desire at the end of the specified investment period. That is our stated goal. At Marmot, we use all of our in-depth training and experience to achieve this. Whether you want to take a trip, buy a house or afford a small luxury - use our free Financial Goal Planner and find out in just a few steps how you can fulfill your dream. To make your heart's desire come true, we take a broad look at the financial markets and can also assess trends and developments with regard to your plan. Our advisors at Marmot are independent of banking products and therefore have no conflicts of interest. They can provide unbiased advice and help build wealth, manage it and ensure it grows over time to meet your financial goals.





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The content in the blogs is solely for general information and to help potential clients get an idea of how we work. They are not recommendations that should lead to the purchase or sale of assets and are not investment advice. Marmot.Finance cannot judge whether and how the statements made fit your investment objectives and risk profile. If you make investment decisions based on this blog entry, you do so entirely at your own risk and responsibility. Marmot.Finance cannot be held responsible for any losses you may incur as a result of information contained in this blog entry.The products mentioned are not recommendations, but are intended to show how Marmot.Finance works and selects such products. Marmot.Finance is also completely independent and does not earn money in any form from product providers.

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