Goals-Based Investing—Aligning Wealth with What Matters Most
Success is not measured by outperforming an index but by the ability to fund life goals.
Most investors are taught to focus on performance—on beating benchmarks, chasing higher returns, or comparing results to peers. But investment performance only matters in the context of what that wealth is meant to achieve. A portfolio that outperforms an index yet fails to fund retirement, business transitions, or family legacies has missed the real objective.
Goals-based investing reframes success. It turns capital into a means of achieving what truly matters: the ability to live life on your terms, support the people and causes you care about, and sustain wealth across generations.
Investors who structure portfolios around clearly defined goals are less likely to make reactive decisions during volatility. They stay the course when markets wobble, avoid costly behavioural mistakes, and can turn volatility into opportunity.¹
At MGD Wealth, we apply this philosophy through a disciplined, structured process known as the Five-Pool Framework, designed to align every dollar of capital with its purpose and time horizon.
Key Takeaways
Success is measured by funding goals, not beating benchmarks.
The Five Pool Framework aligns capital to purpose and timelines.
Clear goals and structure can reduce behavioural risk and improve outcomes.
The Five-Pool Framework
Rather than a single, undifferentiated portfolio, capital is allocated across five distinct pools, each reflecting specific timelines, liquidity needs, and risk profiles. This ensures clarity of purpose, stability through cycles, and confidence in funding what matters most.
Cash Pool (1–2 Years): Immediate liquidity for lifestyle spending, tax obligations, and known short-term commitments.
Stable Pool (3–5 Years): Medium-term capital for property purchases, education costs, or strategic opportunities, balancing preservation with modest return.
Core Pool (6–10 Years): Sustained compounding for retirement, business succession, or major life transitions.
Growth Pool (10+ Years): Long-term capital formation through equities, property, and private markets capturing the illiquidity and equity risk premia.
Intergenerational Pool: Capital dedicated to legacy, philanthropy, and multi-generational impact, integrating values-based and ESG-aligned investments.
By mapping wealth to purpose and time horizon, investors achieve greater goal certainty and avoid the behavioural pitfalls of benchmarking alone. This framework acknowledges that real success is multidimensional: it’s about security, opportunity, and legacy, not just return percentages.
Defining Goals Thoughtfully
The process begins with a clear understanding of what each portion of capital is intended to achieve.
This means considering questions such as:
When will funds be required for lifestyle, family, or business opportunities?
Are there foreseeable milestones, weddings, extended travel, property purchases, or business growth, that need planning?
Do you plan to make lifetime gifts, or structure legacy transfers through trusts and foundations?
The answers guide both the allocation of capital and the positioning of investments. For example, a property purchase planned in four years would be directed to the Stable Pool, while philanthropic objectives without a fixed timeline would sit in the Intergenerational Pool, aligned with values-driven investment criteria.
The Architecture of Confidence
The framework maps investment risk against portfolio time horizon, a progression from immediate certainty to intergenerational impact. Asset allocation is determined by timeline rather than risk tolerance alone.
This structure aligns with how investors naturally think about wealth. Behavioural economists such as Thaler (1985) and Shefrin & Statman (2000) found that investors naturally organise their wealth into mental accounts, separating money earmarked for different purposes.
Goals-based investing formalises this intuition with institutional structure, making the separation explicit and actionable. Our goals funding calculator sets pool-level return objectives and tests sufficiency against spending schedules.
The Five Investment Pools in Detail
Cash Pool (1–2 Years): Certainty and Liquidity
Near-term capital funds lifestyle spending, tax obligations, and known expenses.
This pool prioritises security and immediate access. The approach is to maintain capital in highly liquid, low-risk holdings so near-term spending needs are met without drawing on longer-term investments during volatile periods. Typically, it covers 12–24 months of anticipated expenses.
Stable Pool (3–5 Years): Transition Capital
Medium-term commitments, property purchases, strategic acquisitions, education fees, require balance between preservation and modest return.
Designed for medium-term goals, this pool seeks a balance between preserving capital and generating modest returns. The strategy emphasises stability with diversified, lower-volatility investments and considers tax efficiency, positioning assets where concessional treatment can enhance outcomes.
Core Pool (6–10 Years): Sustained Compounding
The Core Pool funds retirement, business succession, and major life transitions.
This pool underpins major life transitions like retirement or succession planning. The approach is to combine growth and resilience, leaning toward higher growth exposure than short-term pools because immediate needs are already covered. Allocation reflects timelines and objectives, with superannuation structures often playing a key role for tax efficiency.
Capital inside superannuation structures benefits from concessional tax treatment during accumulation and potentially tax-free earnings in pension phase.
Over a 10-year horizon, the difference between 15% tax on earnings versus 30% or 47% compounds significantly.
Growth Pool (10+ Years): Long-Term Capital Formation
This pool is designed for building substantial wealth over extended timeframes, focusing on strategies that leverage long-term growth potential.
The extended horizon allows investors to capture the illiquidity premium and equity risk premium that drive substantial wealth creation. For investors holding concentrated equity from business ownership, the Growth Pool provides structured exit pathways. Rather than liquidating positions in a single transaction, the framework enables systematic diversification over multiple years, coordinating with tax planning to optimise concessional treatment.
Intergenerational Pool: Legacy and Impact
Capital intended for family, community, or philanthropy operates on indefinite timelines.
This pool defining feature is an indefinite time horizon, which requires a governance framework that prioritises sustainability and clarity across generations.
By separating capital according to purpose, families can manage complex dynamics and avoid decision-making conflicts. Different pools can reflect distinct timelines and beneficiaries within a unified structure, ensuring that long-term commitments receive the same disciplined oversight as near-term needs.
A Practical Allocation Example
The framework’s value is most evident when allocating significant capital across different time horizons and objectives. The following scenario demonstrates a potential allocation of $3 million in savings for a retiring couple.
Cash Pool – $225,000: Provides immediate liquidity to cover approximately 12 months of living expenses.
Stable Pool – $450,000: Supports medium-term obligations, including travel, home improvements, or tax liabilities.
Core Pool – $1,200,000: Forms the retirement income base, deployed gradually to achieve a balance between growth and stability.
Growth Pool – $900,000: Positioned for long-term wealth creation, aligned with extended investment horizons.
Intergenerational Pool – $225,000: Allocated to legacy or philanthropic objectives, governed with disciplined oversight.
In the event of a 20% market decline within the first year, near-term liquidity remains secure, while longer-term allocations retain sufficient time to recover, mitigating the need for reactive decisions.
Why The Goals-Based Approach Requires Institutional Infrastructure
Goals-based investing requires coordination across multiple domains: tax optimisation, portfolio construction, estate planning, and liquidity management operating in concert rather than isolation. Each pool operates with different tax profiles, liquidity needs, and rebalancing cycles.
This is not “set and forget.” It requires continuous monitoring, tax-loss harvesting, and disciplined capital deployment where investment decisions account for tax implications in real time.
At MGD Wealth, our total wealth management approach delivers this coordination through a governance framework with institutional-grade capabilities. WTW provides forward-looking capital market assumptions and asset allocation rigour typically reserved for endowments and pension funds.
Quilla delivers independent, evidence-based investment implementation. Together, these institutional partnerships ensure portfolio decisions remain objective, transparent, and aligned with long-term goals while protecting against emotional decision-making during volatile markets.
Success is not measured by outperforming an index. It's measured by funding what matters: retirement security, business transitions, family provision, and legacy impact. Goals-based investing provides the structure to achieve this with clarity and discipline.
To explore how this framework applies to your wealth structure and objectives, contact your MGD Wealth adviser or begin the conversation.
References
¹ Research from Dalbar Inc. found that over a 20-year period, the average equity investor underperformed the broad market by 1.5% to 2% per annum, primarily due to reactionary decisions such as buying after markets rise and selling in downturns.
Important Note:
Any advice included in this article is general and has been prepared without taking into account your objectives, financial situation, or needs. As such, you should consider its appropriateness having regard to these factors before acting on it. Any tax information refers to current laws, is not based on your unique circumstances and should not be relied on as tax advice. Before you make any decision about whether to acquire a certain financial product, you should obtain and read the relevant product disclosure statement. MGD Wealth AFSL no. 222600.
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