By Dan Wicker

In 2018, most of us understand we should be investing for the future. Though we are aware of the importance of investing, and may already be contributing, do we have a strategy? Developing an investment strategy and setting personal and financial goals provides investors significant advantages when it comes to anticipating what’s to come. This month, we sat down with Chief Executive Officer of CWA affiliate, Tectonic Advisors, Haag Sherman, to learn smart investment strategies and why a goal-based investment strategy is so important to your portfolio.

Understanding the various types of investing philosophies can help you and your financial planner decide the best method to reach your personal and professional objectives. Investors can strategize their investing in a myriad of different ways, though two of the most widely used are:

1. Risk-based investing – focuses on optimizing returns, usually over a short time period
2. Goal-based investing – focuses on optimizing your personal and financial goals over a long-term timeline

There are distinct advantages of goal-based investing over risk-based investing. Goal-based investing strategies are often determined by the following factors:

1. Experiences
Goal-based investing is focused on helping you achieve your personal and financial goals. Whether you’re beginning to save for your child’s tuition, buy a retirement home, pay for a wedding or plan for another significant life experience, goal-based investing helps personalize the numbers and strategy.

Certified Financial Planner, Dr. Michael Finke says, “Goal-based investing is valuable because it helps us understand why we are saving in the first place. If the purpose of the investment is to fund a home at retirement, we can imagine ourselves living in the home.”

With a goal clearly in mind, you may get some satisfaction out of the sacrifices you make today, in order to live better in the future.

2. Tolerance for risk
While goal-based investing is focused on achieving goals versus risk-tolerance, there is still a need to evaluate your tolerance for risk in any investment strategy. Unlike risk-based investing, your focus won’t be on short-term investments and potential immediate gains and losses, but rather on how and where to spread out risk across your portfolio to best accomplish your long-term goals. When you decide to pursue a goal-based investment strategy, your financial planner will help you determine how to plan for risk.

“Investors and their advisors should view risk not just as annual volatility, but instead as the likelihood of undershooting goals. It is not enough to evaluate a client’s risk tolerance in the abstract. Instead, risk is inextricably linked to one’s goals, time horizon, and life stage,” notes Olivia Mitchell, contributor for Forbes.

3. Timeline
Perhaps the most crucial factor in a goal-based investment strategy is determining the timeline for which you wish to accomplish your goals. This sets the pace for how much and how often you contribute to your savings and determines what type of accounts or stocks best meet your needs. Haag Sherman of Tectonic Advisors works with clients to help set goals and develop a timeline to reasonably achieve their targets, accounting for risk and shifts in capital.

Sherman notes that, “As we progress in our career, and life, we begin to hold less human-based capital and more financial capital. Understanding that directs the way we strategize client portfolios to stay on target and meet goals.”

Though many firms focus on year-over-year gains, Sherman believes this has the potential to become a short-sighted strategy.

“Goal-based investing is a long-term strategy,” he said. “If a client focuses solely on short-term gains, it can be frustrating. I try to help them materialize their goals and understand how the long-term strategy will ultimately keep them on path to achieving what they want.”

It’s never too early to begin investing in your future, and it’s never too late to sit down with a planner to evaluate your strategy. Working with a financial planner and setting financial goals early allows you to move confidently towards the life you desire.

Contact us to learn more about how goal-based investing could be the right strategy for you, or check out our investment video series for quick tips from our planners.

Cain Watters & Associates LLC is an investment advisor registered with the Securities & Exchange Commission. Information provided does not take into account individual financial circumstances and should not be considered investment advice to the reader. Request form ADV Part 2A for a complete description of CWA’s financial planning and investment advisory services. There is no assurance that other client actual results will be similar to information presented. Estimated future results may not be obtained due to economic, business and personal circumstances. CWA and Tectonic are affiliated firms.



Dan is managing partner at Cain Watters & Associates (CWA), a Dallas-area CPA/RIA firm providing tax and accounting services, ongoing financial monitoring, investments solutions, practice valuations and transition services, and estate planning.


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