PT  - JOURNAL ARTICLE
AU  - Jean-Guy Simonato
TI  - Maximizing the Probability to Reach the Goal: An Exploration Exercise in Goal-Based Wealth Management
AID  - 10.3905/jpm.2023.1.469
DP  - 2023 Feb 06
TA  - The Journal of Portfolio Management
PG  - jpm.2023.1.469
4099  - https://pm-research.com/content/early/2023/02/06/jpm.2023.1.469.short
4100  - https://pm-research.com/content/early/2023/02/06/jpm.2023.1.469.full
AB  - Goal-based wealth management (GBWM) is a portfolio approach in which the investor associates risk with the probability of not attaining a financial goal. Using several datasets, the author examines the performance of a multiperiod GBWM strategy that maximizes the probability of achieving a financial goal. With varying restrictions about leverage and short sales, he compares the goal-based wealth investor with a standard and a goal-attentive mean–variance investor. Without transaction costs, the results suggest that, in terms of goal achievement, a goal-based wealth investor focusing on the probability of reaching a goal does better than a standard mean–variance investor. Compared to a goal-attentive mean–variance investor, the results still favor the goal-based wealth investor but to a lesser extent. With transaction costs, goal-based wealth and goal-attentive mean–variance investors yield similar results in many cases.