Goals-Based Portfolio Theory

CHAPTER 11Human Risks

“Man is an enigma to himself.”

—Carl Jung

Goals‐based investing was born in the private wealth management space, driven by practitioners looking for solutions to the problems they encountered every day—problems of which academics seemed unaware. Nowhere does this ring more true than in those decidedly more human risks—the risks faced by individuals and wealthy families that have nothing at all to do with organizing an investment portfolio. With the technical bits of the theory out of the way, I would be remiss if I did not cover a few of the more human aspects of goals‐based investing. There are enough to cover a library of books, and I do not intend to recount all of the wonderful resources already in existence. Rather, having spent time in the family office space, serving families and listening to family members from around the globe, I have found that there are a handful of very human risks that can legitimately threaten the long‐term growth and preservation of wealth. I do not claim to be an expert here, only to offer my small perspective on a very big topic.

While goals‐based portfolio theory does allow for aspirational goals for which high‐variance outcomes are preferable, I suspect that many entrepreneurs would read most of this book as a “stay‐wealthy” approach (as opposed to a “get‐wealthy” approach). And that is true. This is not a book about how to play option markets more profitably, or how to build a better startup. This is a book dedicated ...