There is an emerging concept in health care known as “precision medicine.” According to the National Institutes of Health, “precision medicine is an emerging approach for disease treatment and prevention that takes into account individual variability in environment, lifestyle and genes for each person.” In other words, instead of treating an illness with a blanket, ‘one-size-fits-all’ approach, every individual is viewed as unique—which means their treatments are customized.
A similar concept applies to the world of investing. Instead of a one-size-fits-all investment solution for a wide array of investor goals, investors should be viewed as unique based on their specific needs and desires. On top of that, an investor’s goals should be categorized by when they’ll need money and what they’ll need money for. J.P. Morgan created the graphic below to illustrate this point ‘precisely’:
Categorizing your goals by when you’ll need money—and what you’ll need it for—can change the nature of an investment plan. Longer-term goals like estate planning and funding health care later in life have longer investment horizons, and could therefore be addressed with higher levels of equity exposure (to achieve long-term growth).
The opposite is true of monies that are needed sooner, such as for travel expenses or a second home. In those cases, the volatility of returns (bar charts above) is lower when the investor tilts away from equities and towards bonds. This rotation may lower overall returns, but it should also reduce the risk of heavy loss.
Another way of examining your financial goals is to think of them as “wants” versus “needs” versus “legacy” (estate planning) items. Part of the planning process with your financial advisor should be to make lists of goals that fall under each category, and assign a financial value to them. When that’s done, you can have a clearer sense of how to position your portfolio depending on the type of growth you need.
Precision Investment Means Categorizing Your Goals
In theory, the idea of precision investing and categorizing your goals probably seems pretty straightforward. The challenge for investors is taking the time to map out your various goals and where they fall (short-term wants/needs, long-term wants, legacy planning, etc..), and then investing accordingly. WrapManager can help. By speaking with one of our Wealth Managers today, you can set yourself on a course of “goal-based investing” that takes into account your specific needs, wants, and desires for retirement. The first step is easy: it’s just a conversation about where you stand and where you want to go.
To get started, give us a call at 1-800-541-7774 or send an email to wealth@wrapmanager.com.
