Goals-based investing

What it means

Structuring wealth into separate portfolios for separate objectives, each with its own horizon and risk tolerance, rather than one portfolio for one risk number.

The exam angle

Mentally sub-optimal by mean-variance standards and behaviourally far more durable, because clients abandon a plan they cannot connect to anything.

Where it appears in the syllabus

• Private Wealth pathwayCFA Level III · exam weight 30–35% · Goals-based planning, tax efficiency, human capital, wealth transfer.
• Portfolio ConstructionCFA Level III · exam weight 15–20% · Equity and fixed-income portfolios, alternatives, institutions, trading costs.

Related terms

• Human capitalThe present value of an individual’s expected future earnings, treated as an asset alongside their financial wealth.
• Asset locationDeciding which account type holds which asset, so that heavily taxed returns sit in tax-sheltered accounts.
• Tax-loss harvestingRealising losses deliberately to offset gains elsewhere, while keeping the portfolio’s economic exposure broadly intact.
• Wealth transferMoving assets to the next generation or to charity, structured for tax efficiency and for the family’s intentions.
• Behavioural biasA systematic departure from rational decision-making, either cognitive — an error of reasoning that education can…
• Investment policy statementThe written agreement setting out an investor’s objectives, constraints and the rules the portfolio will be run by.