š„ Different Goals, Different Strategies? š„
The more Iāve learned about investing over the years, the more Iāve come to think that ādifferent goals, different strategiesā is kind of BS when used too strictly.
Again, when used too strictly.
The problem is that it tries to put every investment choice into a box.
We often hear that younger investors should take more risk because they have a longer time horizon, while older investors who have already accumulated a lot should become more conservative.
But age, time horizon and financial position are circumstances, not goals. Even two people with the same circumstances, time horizon and goal can choose completely different investment strategies.
I still consider myself young, LMAO. Someone with the same time horizon as me could take more or less risk. That difference does not have to come from having a different goal. Maybe we simply have different evaluations of future expected returns. Maybe we understand the same trade-offs but prefer different investing styles.
The classic yield versus non-yield discourse in retirement is another example.
A lower-yielding total-return strategy is sometimes characterized as being for someone who wants to maximize total return or die with a lot of money, as if that must be their goal.
At the same time, selling shares is criticized because you could eventually deplete the portfolio to zero.
So which is it? Am I dying with too much money or depleting it to zero?
Two retirees can have the same spending needs, the same desire for security and the same intention for whatever money remains. One prefers receiving distributions while the other is comfortable selling shares.
The goal does not necessarily differ. Sometimes the withdrawal style is different. Thatās it.
Of course, a preference for yield can also lead someone to own completely different assets with different risks, diversification and expected returns. At that point, it is more than just a different withdrawal method.
But even then, it still does not mean the underlying goal must be different. Sometimes people have the same goal and simply disagree about the best way to reach it.
TL;DR: āDifferent goals, different strategiesā is useful as a starting point, but it becomes a lazy catch-all when treated as the sole explanation for every difference in portfolio construction or withdrawal method.
