Market insights and analysis

By Jerry Wagner

In the 1976 Olympics, gymnast Nadia Comaneci made history by scoring the first-ever perfect 10.0 in Olympic gymnastics. Check it out here. The achievement was so unprecedented that the scoreboard, programmed with a maximum score of 9.99, displayed a 1.00 instead. While the perfect 10 became an iconic measure of excellence, even Comaneci later admitted her routine wasn’t truly flawless.

The same principle applies to investing: there is no “perfect 10.” Every investor experiences ups and downs, and no investment decision is without the potential for improvement. The question is, if perfection isn’t possible, how should investors define success?

Measuring success in investing

Traditional benchmarks, like the S&P 500, are often used to gauge investment performance. However, these comparisons can be misleading. The S&P 500, for example, has suffered significant drawdowns, including losses exceeding 50% twice in the first decade of this century. Few individual investors are comfortable with that level of volatility.

Beyond volatility, benchmarks also fail to account for individual circumstances. They do not reflect personal financial goals, risk tolerance, or time horizons. They also lack real-world costs—management fees, trading expenses, and other factors that investors face. Using them as a sole measure of success can create unrealistic expectations and lead to poor decision-making.

The benefits of goals-based investing

Instead of chasing benchmark returns, many financial professionals advocate for goal-based investing. This approach measures success by how well an investment portfolio aligns with an investor’s personal and lifestyle goals. According to Investopedia, the two biggest advantages of goal-based investing are:

1. Increased commitment to long-term financial goals: Investors are more likely to stay disciplined when they can track tangible progress toward their objectives.
2. Reduction of negative behavioral biases: By focusing on individual goals rather than market fluctuations, investors are less likely to make impulsive decisions driven by fear or greed.

FPI’s OnTarget Investing: A personalized benchmark

At Flexible Plan Investments (FPI), we believe that investors deserve a more relevant way to measure success. That’s why we developed our OnTarget Investing process. Instead of comparing portfolios to broad market benchmarks, OnTarget Investing sets a customized objective for each portfolio at inception and tracks its progress over time.

The process starts with the suitability questionnaire that clients complete as part of their investment management agreement. By pairing each client’s responses with their selected strategy or combination of strategies, we create a personal benchmark based on their stated investment time horizon. This personalized benchmark is included in the initial proposal and provided with each future account statement, offering clients a meaningful way to judge their portfolio’s progress.

Each client’s personalized benchmark is best represented by the OnTarget Monitor, a key feature of OnTarget Investing. Using hundreds of Monte Carlo simulations, the OnTarget Monitor compares a portfolio’s performance against the strategy’s benchmark. The multicolored background on the chart illustrates the probability of achieving forecasted investment outcomes over the client’s chosen time horizon. The black line represents the account’s monthly percentage change, after advisory fees, tracking progress toward the client’s financial objectives.

Portfolios performing within the blue and green zones of the OnTarget Monitor are considered to be on track. While market downturns may temporarily push even well-diversified portfolios into the yellow or red zones, prolonged time in the red zone suggests that a discussion with a financial adviser may be needed to reassess investment strategies.

The bottom line

Investing isn’t about achieving an impossible standard of perfection. It’s about defining success in a way that aligns with personal financial goals. By embracing goal-based investing and using tools like FPI’s OnTarget Investing, investors can measure progress meaningfully—without getting caught up in arbitrary comparisons.

While markets may not always deliver a perfect performance, staying focused on long-term objectives can help investors achieve financial success in a way that truly matters to them.