PUBLISHER: Journal of Wealth Management
DATE: Winter 2016
DOI: https://doi.org/10.3905/jwm.2016.19.3.022
PDF: Not available due to copyright restrictions

The article presents a goal-based portfolio optimization approach that is truly native to the goal-based environment. It begins by redefining risk as the probability of failing to attain a specified goal and redefining reward as the excess wealth over and above what is required by the goal. It then presents an optimization procedure that seeks to minimize goal failure and maximize excess return. In preliminary tests, it finds that this goal-based procedure lowers the probability of failing to achieve a specified goal while delivering higher excess wealth than the procedures currently available.

Goal-based investing, wealth management, financial planning, portfolio theory