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PLANNING PROCESS

Brightline Investment Advisors utilizes the goal based planning identifies specific goals or needs and designs unique investment policies for each. Traditional financial planning might ask you to complete a “risk tolerance assessment” and then identify an asset allocation for all of your investable wealth. This approach fails to take into account timelines of specific cash-flow needs and the ranking of their importance.

For example, you might define yourself as being risk tolerant but some of your goals may have a criticality or time horizon that is incompatible with high volatility. We can illustrate this with two goals:

Even though you are risk tolerant, we would use a low risk (low reward) bond strategy that would mature near the targeted date at $25,000.  This can be done with either individual bonds or certain fixed date ETFs (that feature a portfolio of fixed maturity bonds, for example, the Guggenheim BulletShares).

On the other hand, the investment strategy for the more flexible “want” of a celebratory vacation in 15 years would have an investment strategy that more closely mirrors your tolerance for volatility and the fact that you are absolutely depending on $25,000 on a specific date in the future.

 

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