Financial Goal Planner with Flexible Asset Allocation

Asset allocation or the percentage allocation to different asset classes in a portfolio is probably the key aspect of investing. Not only does it determine the corpus that we would accumulate, it also determines the volatility associated with the portfolio.

Those who start investing for retirement at an young age can afford to maintain a high percentage of equity allocation in retirement. The same is not true for those who started late. The same is not true for other long term financial goals like our children’s education. As the goal draws near it is prudent to change the asset allocation by shifting gains from equity to debt.

For example, a goal 15Y away can have 60% equity for the first 7years. After that 40% for next four years and then decreased by 10% each year thereafter. There are so many ways to do this. The trouble is, if we do this, the amount that we need to invest right from the beginning will change. This sheet allows you to vary the asset allocation and calculate the investment amount required. The amount can also be increased each year by fixed amount to reflect increase in income.

It is best to have a de-risking plan so that the amount necessary for investment can be determined with reasonable accuracy.

Most goal planners (including mine) work either do not consider asset allocation or consider a fixed one. Recently, following an idea suggested by CFP Deepesh Mehta, I published the Low-stress retirement calculator with flexible asset allocation.

In this post, I follow that up with a financial goal planner which would allow the asset allocation of retirement and 5 other financial goals to be varied for each year of investment.

This calculation requires an Excel macro to be enabled and executed each time a change is made to the inputs.


Download the Financial Goal Planner with Flexible Asset Allocation

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