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Investing 101 Mins Read

Goal-based Investing vs. Lifecycle Investing: What Should You Choose?


With more and more people in their 20s and 30s looking to start on their investment journeys, different styles of investments have developed over the recent years. Of these, goal-based investing is the most recent one, with various young investors favouring this strategy over lifecycle investing. Before you work out which strategy suits your needs the most, you must first understand the differences between the two. Knowing when and how they can benefit you is the best way to ensure your investment strategy is a highly optimised one that works entirely in your favour. Keep reading to know more!

Goal-based Investing

As the name suggests, goal-based investing is a strategy that focusses on helping investors reach certain life goals. It requires investors to chalk down their financial plans for the coming 5-10 years so that they can set measurable goals and milestones to hit. For instance, if an investor knows that their child may be ready for higher education in the next 10 years, then investing in a fund with a specific term of 10 years with the goal of being able to pay for their child’s education becomes an example of a goal-based investment.

Young investors can apply this strategy to almost all arenas of their lives. If you aspire to travel the world for a few months, buy a home for yourself, buy a car in the near future, or attain any other specific goal, then this strategy is apt for you.

A huge advantage of pursuing goal-based investments is that it allows investors to make deeper commitments to their own lives and goals, without allowing distractions to delay the same. If one were to simply save money in a jar towards a goal, for instance, one would be quite likely to dip into those funds as soon as the first sign of emergency comes knocking at the front door. However, when choosing investment products, one can rest assured that the funds stay under lock and key, and continue to grow until they are required. Of course, investors concerned about emergencies can always set in motion recurring or fixed deposits with their banks to keep funds that can be easily liquidated aside. The point of goal based investment is that nothing should come in the way of you and your dreams for the future.

How does goal-based investing impact the kinds of funds you choose to invest in?

With goal-based investing, investors know that they require a certain amount within a certain timeline to attain the goal. The primary objective here is not wealth-building with generic parameters in mind.  As a result, investors are more likely to choose funds with lower risk profiles that guarantee a certain pay-off. Furthermore, they are also more likely to pick funds that have shorter term periods (as most goal based investments are carried out with short-term goals in mind). These factors help investors narrow down their choices of funds and make decisions that are more aligned with their own needs.

Lifecycle Investing

Lifecycle investments are sometimes confused with goal-based investments as they also help investors reach certain goals. However, the difference lies in the fact that these goals are often long-term ones, such as retirement saving, and therefore come with much longer term periods than goal-based investments do. An investor looking for goal-based investments will choose mutual funds or other short-term investments. However, an investor looking for lifecycle investments generally diversifies their portfolio with bonds and stocks instead of 10-year funds.

Lifecycle investments generally follow predetermined paths, with a single approach used for all investors. As a result, such funds do not offer great opportunities for flexibility based on an individual’s needs.

Having said that, however, lifecycle investments are great for investors who want to build their wealth over a large period of time. They are ideal for both, active and passive investors. The trick to these investments is to start early, as time is often the component needed most to make your funds grow. So, the sooner you invest, the better returns you can expect from your investment. As a general rule, it is always ideal to split your investments between goal-based ones and lifecycle ones so that you can accumulate wealth, and also hit the milestones you want to achieve in your life.

How does lifecycle investing impact the kinds of funds you choose to invest in?

With lifecycle investments, as you do not have a specific goal in mind other than accumulating wealth, you can afford to take more risks than when you invest in goal-based investments. As a result, the opportunity to grow your wealth exponentially is tremendous, however, so are the risks. Choosing the financial products that you want to invest in requires heavy analysis from your end regarding what kinds of risks you are willing to take.

What should you invest in if you are just at the beginning of your career?

Young investors with fewer disposable income also want to grow their funds, however, the high prices of stocks and bonds can often be daunting, leading to them holding off on their investments for a few years. This does not have to be the case. As a young investor, or a first-time investor, you can choose the security of goal-based investments in order to set aside some of your money every month to help with grow. Once if grows into a larger sum, you can further invest the same, or just allow it to compound with time.

With investments, the goal is always to save for the future so small investments made at the early stages of your career can also be very helpful. You can also speak to a financial advisor regarding investing in low cost global ETFs if you want stock-market based investments. Do not delay your investment journey just because you feel that you are not earning high sums of money. Get started today and your future self will thank you for doing so!


The materials and data contained herein are for information only and shall in no event be construed as an offer to purchase or sell or the solicitation of an offer to purchase or sell any securities in any jurisdiction. Kristal Advisors does not make any representation, undertaking, warranty or guarantee as to the update, completeness, correctness, reliability or accuracy of the materials and data herein. All opinions, forecasts or estimation expressed herein are subject to change without prior notice. Kristal Advisors and its affiliates accept no liability or responsibility whatsoever for any direct or consequential loss and/or damages arising out of or in relation to any use of opinions, forecasts, materials and data contained herein or otherwise arising in connection therewith.

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