What does goal-based investing focus on?

Goal-based investing centers around aligning an investment strategy with an individual's or entity's specific financial goals. This approach involves understanding what the investor is trying to achieve, be it saving for retirement, funding a child's education, buying a home, or any other long-term or short-term financial target. By defining these goals, investors can tailor their asset allocation to ensure that the risks taken and the investment vehicles chosen are in line with their particular needs and timelines.

For example, an investor saving for a short-term goal may choose a more conservative mix of assets to protect their capital, while someone investing for retirement may adopt a more aggressive strategy aimed at long-term growth. This intentional alignment helps ensure that the investor's financial plan remains on track to meet desired outcomes.

The other options reflect strategies that do not prioritize the alignment of investments with specific financial goals. Focusing solely on high-risk investments does not consider the individual's overall financial situation or time horizon. Similarly, pursuing short-term profits or investing only in stocks can neglect broader asset allocation strategies that may be necessary for achieving diverse financial goals.