Investing for life: Why I believe in goals-based investing

It’s not just a marketing buzzword.

Never once, in my 15-plus years managing wealth, has someone complained about their portfolio rising too quickly. The inverse, of course, is not true: I’ve fielded plenty of complaints about markets dragging portfolios down. Yet both are examples of volatility, and according to traditional portfolio theory, volatility should be minimized – both on the upside and downside.

Is this reasonable? It depends how you define ‘risk.’ Where modern portfolio theory (MPT) defines risk as volatility, goals-based portfolio theory (GBPT) defines risk as the probability that you fail to achieve your goal. Though it may seem to be a distinction without a difference, this subtle definitional change cascades into a chasm of differences!

Portfolio losses are a perfect illustration. Losses matter because [Read more at CityWire…]

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