When we say we put planning first, we mean it. Asset allocation is traditionally conceived in a mean-variance framework, where an investor strives to maximize the expected return for a given level of risk. However, this conventional approach does not consider three important aspects of investing:
- An investor’s behavior
- Asset allocation for a goals-based financial plan with a time horizon
- The trade-off between current and future spending
That’s where a goals-based financial plan comes in. By designing our investment strategies around planning, it simplifies goals-based planning by grouping spending into time periods and creating portfolio segments focused on each time period.