What Is Goal Based Financial Planning?

financial planning

Goal-based investing is a newer approach to wealth management that focuses on investing with the goal of achieving certain life objectives. Rather than focusing on generating the highest possible portfolio return or beating the market, goal-based investing (GBI) involves a wealth manager or investment firm’s clients measuring their progress toward specific life goals, such as saving for children’s education or building a retirement nest-egg.

Every investor must have some financial objectives in mind when investing money into an investment vehicle. Whether it’s purchasing a home, retiring early, funding your child’s school, or achieving financial independence. And goal-based financial planning is the best method to meet all of your investment goals at different phases of your life. It’s a relatively new wealth management strategy that emphasizes investing to achieve specified financial objectives.

Importance Of Goal-Based Financial Planning

The importance of goal-based investing is that it provides you with not just a smart investment strategy, but also a path to attaining your goals and, as a result, a stress-free future. However, it also affects the payroll management system of your business. Here are the 3 main investing reasons:

It Gives A Purpose To Your Investments

When you have extra cash, you may be wondering how to invest it, how much to invest, and for how long. Goal-based investing solves these questions since you know exactly how much money you’ll need and when you’ll need it to achieve your goals, so you can figure out how much you’ll need to invest. To ensure that you reach your financial goals, goal-based investment is beneficial in wealth creation.

Helps In POrtfolio Diversification

The primary goal of investing is to make more money. You can get better returns by matching each rupee of your investment to a financial goal. You’ll almost certainly use a variety of financial products to achieve your goals. This helps you to diversify your portfolio, lowering your risks while increasing your long-term wealth building potential.

Helps In Making The Right Choices For Your Business

You’ll be able to choose the correct investment items once you’ve answered the ‘how’ above. You know your particular needs, so you can figure out how much life insurance you’ll need, whether mutual funds are a good investment, and how much money you’ll need to retire comfortably. You may make good investment selections without following the herd.

Process Of Goal-Based Financing

Once you’ve assessed your current financial condition and various goals, you’ll need to devise a strategy for achieving them within the timeframe you’ve set. You must comprehend the following:

  • Amount required to achieve your objective
  • Amount to be invested in a lump sum or on a monthly basis
  • Determine the appropriate investment product based on your investment horizon and risk-to-reward ratio.

Choosing the correct financial product is challenging and takes extensive research and analytical abilities. You must hold your investments for a longer period of time if you want to generate money. This is because you achieve the power of compounding over time. Compounding is when your earnings are reinvested in the same financial instrument to earn further returns, resulting in a sizable corpus over time. Investing in a SIP is a simple method to get the benefits of compounding.

To reach your medium and long-term goals, most experts advocate investing in mutual funds. Several asset management organisations (AMCs) do, however, offer a variety of mutual fund schemes. It takes a long time and a lot of effort to evaluate and analyse these.

This work is made easier by our patented ARQ mutual fund investment engine. It evaluates several mutual fund strategies using scientific methodologies. To match investment suggestions to your risk appetite, lifestyle, and financial goals, over a billion data points are examined.


Life is not a static entity. You can’t expect markets to expand at the same rate as you can’t expect an arbitrary event to occur in your life (e.g., a pandemic that affects your income, a parent dying, your spouse having a stroke). Financial planning is an iterative process that, if done well, necessitates constant work. It’s not a one-and-done exercise in box-ticking. Each year, you may need to adjust your course.

You and your financial planner can harmonise your financial world by following a qualitative, values-based approach. Then, each year, you can make minor adjustments that, while seemingly insignificant at the moment, might have a significant impact on where you end up. Sorry, but goal-based planning isn’t a viable option. Life is in constant flux.