Achieve Long-term Wealth with Goal-based Investing

Freddy Lim

Co-founder and CIO

If you were to ask a marathon runner how he was able to achieve the feat of running 42km, he probably won’t tell you that he just woke up with the idea to do it and ran that distance then and there. He’ll tell you that it took a plan that he executed with dedication and determination. He probably started running a few minutes a few times a week, and then built up to several kilometers, and gradually worked up to greater distances of 20km and 30km, even on days he didn’t want to run.

Setting goals, whether they are short-term or long-term, is a great way to ensure that you can do what you want, because it helps you properly prepare. Taking ownership of your life by setting up strategies maybe to retire comfortably, or perhaps send your daughter any university she wants to attend, is empowering. Investing is a personal experience should not stress you, but rather, empower you.

That’s where goal-based investing comes in.

What is goal-based investing?

Goal-based investing is a strategy that encompasses all of your financial and relevant personal conditions and needs so that you can reach your goals on your terms.

Goal-based investing assigns specific strategies to each of your goals. Want to retire in 30 years with annual income of RM100,000? Have a specific purchase in mind by year’s end? Each goal has a different time horizon and requires a different risk-return profile, and therefore a different mix of asset classes; for example, you should have more equities in a 30-year time horizon portfolio for retirement, than in a 3-year time horizon “buy-my-house” fund.

Investing in a goal commits you to set up a savings and investments strategy now so that you get there when you want to. With this strategy in place, you won’t have to live your life with uncertainty as to when you will have enough to retire, or wondering if you are doing what you should be doing to get there.

Goal-based investing encourages you to maintain focus, accountability, and motivation.

Focus

Simply setting money aside can certainly provide you the flexibility to spend money on the things you want to, but it can also be conducive to impulse buys, as the money isn’t necessarily categorised for a specific purpose. Investing in a goal, especially with automated deposits, can help to ensure that you don’t let other temptations get in the way of your goal. 

Accountability

By giving different accounts specific purposes, you take control of your money, and ensure that you don’t compromise your goals. Seeing your progress will help you stay on track to reach your target. With a timeline, you can maintain perspective and patience. Whether or not you have automated deposits to your investment account, you can still keep track to know what you need to do to stay on track for your goal. It also provides measureable results so that you can always know in a matter of moments of logging into your account how you are progressing.

Motivation

Just like the marathon runner, having something specific to work towards can motivate you to do whatever it takes to achieve your goal. Having a plan that gives you focus is certainly important, but seeing that there is progress being made towards the goal is what can motivate you to eventaully achieve it. Target tracking in goal-based investment products will encourage you to keep going on both good days and bad days. 

Goals are personal

Your goals are personal, so find a savings strategy that matches your particular preferences and needs. Remember, they're your goals, no one else's. But that also means that only you are responsible for reaching them.

This is investing, redefined.

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