This article was originally published on U.S. News by Kristin McFarland, Wealth Advisor at Darrow Wealth Management. Most investors focus on traditional benchmarks, such as the Standard & Poor’s 500 index, to evaluate the success of their investment portfolio. Unless you’re only invested in large-capitalization, predominantly U.S. equities, the S&P 500 may not be an apt comparison to your portfolio.
Further, how one did relative to a market index doesn’t really mean anything – what the investor really wants to know is if they’re on track to meet their goals, like paying for college or taking an early retirement. Goals-based investing helps to solve that problem by looking at investment performance in relation to progress on personal goals; not just market returns.