Does purpose-driven investing sound too risky to you? Don’t worry, it has many real benefits.

It suits your personality.

Trying to fit a square peg into a round hole usually ends in frustration and failure. Many investors try to do just that. Not all of us have the time, ability or even the desire to actively participate in our investments. Purpose-driven investing doesn’t pigeonhole you into a one-size-fits-all system. In a later article, you will learn your investment personality and then an investment strategy based on your specific investment personality.

It’s more intuitive.

It’s more natural and consistent with how we think about investing. Again, we’re focused on the outcome. We tend to compartmentalize things and think about achieving individual goals. Buying a new plasma TV evokes different emotions and feelings than paying for our children’s college education. Not necessarily better or worse feelings, just different. Having separate investment accounts keeps these two very different goals mentally and physically separate.

It’s easy to track progress.

Because each investment account is designed for a specific goal, you can instantly see how close you are to achieving each of your goals.

There are fewer risks.

Each account will be invested based on when you need the money and how close you are to having enough money to reach the goal for that account. So you won’t unknowingly take more risk than is necessary for any of your goals.

You have a better chance of reaching your goals.

Accounts with short-term goals can be invested more conservatively and accounts with long-term goals can be invested for growth. This gives you a much better chance of achieving both your short-term and long-term goals.

You have the ability to prioritize goals according to their importance.

Not all goals are created equal. While you may have eleven different goals you would like to achieve, some are definitely more important than others.  Purposeful investing allows you to easily add weight to more important goals. If you achieve more important goals, you can invest in less important goals.

It focuses on the outcome rather than the process. Do you want an investment with a low standard deviation, high alpha, and low P/E ratio, or do you just want to put your kids through college, buy a house, and enjoy a nice retirement?

To achieve your goals as quickly and efficiently as possible, you need to save first and then invest those savings effectively. You’ll learn more about this in the next lessons!