CONTRIBUTORS
Deep Ratna Srivastav
Chief AI Officer
Franklin Templeton Technology
Max Gokhman, CFA
Deputy Chief Investment Officer
Franklin Templeton Investment Solutions
Lavina Mehta, CFA, RMA
Goals Based Solutions
Franklin Templeton Investment Solutions
Sirisha Gorjala
Head of Digital Products
Franklin Templeton Technology
Executive summary:
A traditional approach to the accumulation of wealth prioritizes a static risk/return profile or a risk/return profile that becomes more conservative with age. This may be effective at producing efficient portfolios but has shortcomings when it comes to accomplishing the goals of clients.
On the other hand, goals-based investing builds portfolios specifically to help investors reach their objectives, using techniques such as dynamic reallocation and asset liability matching to improve the probability of success.
Franklin Templeton’s Goals Optimization Engine (GOE®) utilizes multiple inputs to optimize for a portfolio that maximizes the probability of success that an investor’s goals will be met. Internal back testing shows the success of GOE over full market cycles including periods of significant volatility.
What is goals-based investing?
Goals-based investing places an investor’s personal aspirations at the heart of the portfolio construction process. Rather than defining risk in terms of market volatility, it reframes risk the way an individual would—as the possibility of not meeting a future obligation or goal.
Goals-based investing builds portfolios specifically to help investors reach their aspirations, using techniques such as dynamic rebalancing and asset-liability matching to improve the probability of success. Every investment decision—from initial model selection to future adjustments—is made with one objective: helping the client stay on track to achieve what matters most to them.
This paper introduces Franklin Templeton’s Goals Optimization Engine (GOE®)—a technology platform designed to put investors’ goals front and center in the advice process.
WHAT ARE THE RISKS?
All investments involve risks, including possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested.
Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in an investment portfolio adjust to a rise in interest rates, the value of the portfolio may decline. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments.
Hypothetical performance results may have many inherent risks. One of the limitations of hypothetical performance is that they are constructed with the benefit of hindsight. Alternative simulations, techniques, modeling or assumptions might produce significantly different results. Actual results will vary, perhaps materially, from the hypothetical results presented in this document. No representation is being made that any account will, or is likely to, achieve profits or losses similar to those described here.
WF: 7172008