Goal-Based Investing: What is it & How it Creates Wealth?

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Goal-based Investing is more of a mindset that assists in defining, calculating and creating a strategy to achieve a range of Financial Objectives. The underlying idea is not to ‘chase’ financial investment returns but instead accomplish a purpose.

What is Goal-based Investing? 

Goal-based Investing is more of a mindset that assists in defining, calculating and creating a strategy to achieve a range of Financial Objectives. The underlying idea is not to ‘chase’ financial investment returns but instead accomplish a purpose. 

A Financial Objective can be to save money for a house, a vacation abroad, higher education, wedding costs or retirement. To achieve these financial objectives, goal-based investing becomes vital as it gives a purpose to your investments and helps you attain financial independence in its true sense. 

Goal-based Investing is a method of Investing that is based on your Financial Objectives. It links your savings and investments to a specific objective and aims to instil discipline into your investing approach. 

Your savings may have been previously invested in a variety of market-linked financial instruments like fixed deposits, public provident funds, mutual funds, stocks or real estate. However, it is essential to identify how much amount must be invested in a particular investment avenue to help in achieving your goals. 

Goal-based investing is helpful as it enables you to list down your goals, timeline for attaining goals and how much money you will need to invest for attaining these goals. This also helps you in identifying the accurate amount that you will need to fulfil your financial goals

Let's understand the importance of goal-based investing in one’s wealth creation journey and how to match your investment to attain your financial objectives.

Importance of Goal-based Investing

Every person has financial objectives that they would like to accomplish in the short, medium or long term. A short-term objective would be, for instance, planning to purchase a car within the next two to three years. Similarly, planning for your retirement and your children's further education might be categorised as long-term goals. 

Goal-based investing refers to consistently making investments in order to achieve the desired financial goal. Goal-based investing is a process whereby you first define goals for what you want to accomplish in the future. 

Making a list of all your requirements helps you see things clearly and determines how much time you will need to devote to each objective. Furthermore, your goals will help you determine the kind of risk you should accept. 

Goal-based Investing is significant because it not only provides you with a sound investment strategy but also helps you in framing the right path for realising your aspirations and creating wealth in the long run.

How does Goal-based Investing help in wealth creation? 

  1. Helps in assessing the accurate amount for your financial goals

When you invest with a purpose or goal in mind, you will make a list of the objective you want to accomplish, the deadline for doing so and the amount of money required to do so.

Hence, goal-based investing helps you in assessing how much money you will need (approximately) to achieve a financial goal and how to invest wisely to attain the financial goal/s. 

  1. Instils Investment Discipline

If you're thinking about creating wealth, investing at regular intervals becomes vital. When investors do not have a goal in mind, they tend to ignore investing regularly and therefore miss out on the benefits of compounding

Thus, it is essential for investors to plan their investments according to their financial goals so that they invest in a regular manner. Financial goals can be attained through regular SIPs, periodic portfolio rebalances etc. 

  1. Helps in selecting the right financial products

Goal-based investing helps investors in choosing the right investment instruments like stocks, bonds, mutual funds, ETFs and commodities among others. 

It is because when you know your financial goals precisely, it is easy to calculate the required investment amount to assure financial security after retirement. This also helps you in making wise investment choices without following the crowd. 

  1. Helps in Portfolio Diversification

The main aim of Investing is to gain greater profits. You can increase your returns through your investment towards a specific financial objective. 

To attain your financial goals, you will try to include various investment instruments. This enables you to diversify your portfolio, lowering your risks while helping you build long-term wealth. 

  1. Enhances your ability to be Financially Independent

By actively engaging in goal-based investing, you can achieve financial independence by coordinating your investments with clear, time-bound financial objectives. Goal-based investing enables you to develop a corpus for the future and gives you the assurance that all of your goals will be achieved without stress. 


To conclude, it is fair to say that goal-based investing helps you in assessing where to invest, how much to invest and when to start investing so that you can attain your financial goals. To begin goal-based investing, ask yourself, “What am I saving or investing for?” and “How should I invest to meet my future goals?” 

mastertrust helps you in allocating a part of your investments for a specific life goal – a crucial practice to ensure that funds are available in the right amount and at the right time. Goal-based investing helps you in planning your investments better and work towards your future goals faster. 

So, get in touch with us today for Goal-Based Investing and Wealth Creation.