What is Goal-based Investing? Why is it Important for Leaders?

Goal-based Investing

Goal-based investing or goal-driven investment is a relatively newer approach to wealth management for the fulfilment of financial goals. As a company expands or plans the future, the leaders need to plan investing based on what goals the company is moving towards. The right kind of investment can help you achieve these financial goals in the future. 

Goal-based investment is better than traditional savings or investment schemes. This kind of investment takes care of specific purposes for your company and offers tailor-made financial solutions. Meticulous planning and cost calculation are required to set these goals. Planning and successfully executing institutional goals are the key traits of excellent leaders. 

Senior management programme is arranged by organisations to educate their leaders to comprehend the various long and short-term goals; plan for their deadlines, work out their costs and advise suitable investment instruments. For individuals and organisations alike, goals must be specific, measurable, achievable, realistic and time-bound i.e. SMART.

Five-Step Approach to Success

Goals are time-bound and occur in different phases of a company’s life. Expansion, diversification and acquisition are some of the common organisation’s goals. For all goals, a basic five-step approach is required - 

  • Identification of financial goals 

Any benchmark to be achieved must be converted into its equivalent financial goal i.e. the monetary cost of the goal must be ascertained successfully.

  • Categorisation of goals into time brackets 

Goals may be short-term (a few months to 2 years), medium-term (3 to 8 years) and long-term (10 years or more).   

  • Asset allocation 

Choices are to be made from debt, equity and hybrid instruments.

  • Investment channel 

Selection of the right investment channel is the next step. For example, organisations may invest in other growing or fast-developing companies. They may even make investment banks their financial goal partners.  

  • Review periodically 

Invest and forget approach” is not advisable. Leaders need to review periodically and should course-correct accordingly. 

Why is Goal-based Investing Important for Leaders? 

Goal-based investing is important for leaders for the following reasons - 

  1. Goal-based investing acts as a bridge between specific organisational objectives and strategic vision. Leaders have a clear idea of the growth targets and the timelines allocated to each one of them. The investment theory helps redefine the organisational long-term financial and strategic success over the age-old practice of short-term monetary gains.
  2. Goal-based investing helps leaders to manage risk more effectively.
  3. Goal-based investing fosters not only financial discipline but also operational discipline in an organisation. When a specific organisational goal is given a specific timeline, leaders are tasked with working out the logic of the contribution to such goals. Regular review of performance enables the leaders to make their team accountable.  
  4. Leaders need to focus on other aspects of business rather than measuring success merely by financial metrics. Broader meaningful objectives like socio-economic impact, employee well-being and sustainability are also to be considered if a company must emerge successful in totality. Goal-based investment also incorporates the financial cost on account of these objectives and helps the organisation to contribute towards society and the environment besides making it financially successful.   
  5. For specific goals, the input parameters are known and managing risk becomes much easier. This investment method prevents impulsive and emotion-based investment and protects wealth from market volatility.
  6. Leaders can align organisational goals with those of the stakeholders like shareholders, clients, vendors, employees and various communities.
  7. Today’s world is highly competitive, and clients demand superior but cost-efficient services. Goal-based investments help leaders to optimise resources and ensure client satisfaction.
  8. A leader’s job is incomplete without accountability and performance measurement. With all the preset numbers at his fingertips, a leader can well measure the accountability and performance of his team or individuals at any time. 

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Benefits of Goal-based Investing

There are quite a few benefits in goal-based investing, which make it more acceptable for organisations, than traditional return-based investment. Plus, as leaders in a corporation, often, you have to plan out investments and justify it to stakeholders or board of directors. Hence, you should be clear of the benefits so as to explain it better to upper management. 

The benefits of  goal-based investing are as follows - 

  • Calculation of the accurate amount of the goal 

Any financial goal, whether of short-term or long-term period, can be easily computed when the present value of the goal, the period and the average inflation rate are known.

  • Picking the right investment products 

Common practice is to invest in debt instruments for short-term goals and equity for long-term goals.

  • Balancing of portfolio 

When major goals are allocated, periodic performance reviews guide the investors to shift their investment from one asset to another. By this process, investors’ gains may be both safeguarded or accelerated, from case to case.

  • Avoiding debt traps 

A loan taken in desperation is a result of poor planning. Goal-based investment steers an investor clear of such unwarranted debt traps besides satisfying their financial goals.

  • Maintaining fiscal discipline 

Goals set direction. Investments without goals are often subjected to halts due to distractions or random causes. Goal-based investments add discipline and regularity to the investor. Logical investment products help to achieve financial goals and keep emotion-based investment attempts at bay.

  • Check on impulsiveness 

Goal-based investment is a process-based investment and does not work on the theory of highest ROI. Investors have the benefit of reaching their financial goals through a proven and tested method.


Goal-based investing enables a leader to align financial objectives with strategic ones and improves his risk management skills. A leader steers an organisation into a successful venture not only by dint of financial parameters but also by the measure of its contribution towards society and the environment. 

The Senior Leadership Program in Fintech by Imarticus will be the perfect start for the candidate who wants to master the concept of goal-based investing. It is an online as well as an offline course. The duration of the course is 6 months. 

Visit the official website of Imarticus for more details on this course. 

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