Investment is one of the ways to help you achieve your life goals, andMaking decisions sound financial decisions, free from arbitrary market benchmarks.

So we should ask: Why not spend everything we earn without thinking about the future?

One possible answer to this question is that we may face a difficult time when our expenses exceed our income. This may be temporary due to

an unexpected accident, unforeseen education expenses, or permanent circumstances such as retirement.

So we need to understand, fundamentally, that investing and saving mean delaying consumption today in order to have something better tomorrow.

But do you think investing guarantees that you’ll be better off tomorrow than you are today?

Certainly, the goal of investing is to maximize returns. Higher returns mean more money, which translates into a better standard of living,

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The problem with that argument is that it ignores risk, as well as how your behavioral biases—or investors’ biases—can affect decision-making.

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Let’s say your investment goal is to increase your returns. If you expect an average public equity fund to return 13% annually over the long term, while

someone offers you 20%, wouldn’t that be a better investment? The rule here is that the higher the return on offer, the more risk you have to take to achieve it.

You could also get caught up in fraudulent investment schemes and lose all your money.

That’s why goal-based investing—sometimes called “outcome-based investing”—is gaining traction. Put simply, investors have

specific goals they want to achieve, and should choose investments that align with those goals (rather than chasing returns). These goals might include paying for a child’s education,

buying a new car, taking a vacation, or saving for retirement.

In some ways, this resembles the “liability-driven investing” model used by some pension funds, which aim to accumulate enough

assets (member contributions and investment returns) to meet their future obligations (paying pensions). It is also the approach used by some advisers

Investors are asked to choose their goal and investment horizon, then select investments that align with that goal.

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Goal-based investing

A goal-based investment approach may not maximize returns, but investors won’t take on more risk than necessary. Recognizing that an investment choice

was made with a specific goal in mind makes it easier to stay on track when markets fluctuate. Investors often come face to face with their greatest

enemies when switching investments: the tendency to “chase returns,” as we’ve mentioned.

Information recently shared by Momentum Investments at the 2019 Global Investment Forum shows that only about 35% of

Advisors in its program achieved at least the inflation rate for more than half of their clients, while around 71% of clients on the platform failed to outperform

inflation over the investment period. This means that around 9% were negatively affected and experienced negative returns.

In this regard, Janet Maré, CEO of Momentum Investments, says: “This proves that fundraising is not a strategy that can be

easily exploited.”

Some may believe that the role of Financial Advisor is simply to select the best-performing investments and increase portfolio value, but as the regulatory environment shifts

Moving away from a principles-based advisory model—and beyond the sales environment—advisors are under increasing pressure to demonstrate the value they add.

In other words, today’s financial advisor is essential to coordinating our financial lives.

As Marie says: “Focusing on a realistic life goal recognizes that people invest their money to meet their everyday needs and long-term aspirations, not simply to see

the market index rise arbitrarily—underscoring the need to work with a financial advisor.