You can compare investing with a journey where without being clear on where you want to reach you will not make it anywhere. When you invest without setting any goals you will not reach your desired outcomes. There are various benefits of goal-based investing, the main being improving financial well-being.

When you invest without any investment objectives it is like traveling without any destination. You are most likely to reach your financial outcomes if you set SMART goals. It stands for Specific, Measurable, Achievable, Realistic and Time-bound.

If you want to follow the right path and stay on track to fulfill your financial responsibilities and move toward financial security then you should practice goal-based investing. You can have different goals like marriage, retirement, education for children, buying a vehicle and more. Other goals can be repaying the debt or creating wealth.

Benefits

• Goal-based investing helps you to make your financial goals and prioritise them. Setting SMART goals can help you make the right investment decisions and ensure that you stay on the right path to achieve your objectives. When you set goals you know where to invest.
• When you know what your goal is and how much time you want to achieve it, then you can choose the right investment options that can help you reach your goals effectively and efficiently. For example, depending on the tie required to reach your goal you can invest in equity, debt or hybrid products.
• Even if you plan well for your future there are always some unexpected events where you may need a large sum of money immediately. Such expenses can be collected through emergency funds.
• When you link your investment to your goals you can make informed decisions based on your needs and situations. If you get hit hard then you may have to replan and rest your goals and expectations. Investors should review their goals regularly and rebalance their portfolios if required so that their money is invested most effectively and efficiently.
• If goals are not set clearly then you may face a huge capital requirement at the time of the maturity of investments. Investors then have options like compromising on their financial goals, taking loans or arranging for money by disposing of assets. With proper planning, such undesired situations can be easily avoided.
• When you set goals with timelines of achieving them then you will follow them with discipline. You will be able to invest for the long term and improve your well-being. When investments are done without setting goals there is no purpose and a direction which may lead to straying from your plans. Investors will also move away from making emotional decisions and biases.

Most brokers offer goal-based investing apps to help you set goals and achieve them efficiently. Appreciate offers an app that allows you to set goals. It offers AI-based recommendations to help you achieve your goals.

The author is a writer and likes to write about the options available in investing. Here the author has explained goal-based investing and goal-based investing app.