What is Gamma?

Measuring how financial planning strategies can improve income during retirement.

Paul Kaplan 22 October, 2014 | 6:00PM

The purpose of financial planning is to help investors reach their financial goals. For a lot of people this means having enough money at the right times to finance various needs or desires, such as a child's education, a special family event like a wedding, or the purchase of a new vehicle.

But by far the largest financial goal is to be able to finance a certain standard of living during one's retirement years. This goal is not only multi-year, but because no one can predict the date of their death on the day their retirement starts, the length of the period is unknown.

While financial goals are almost always stated as amounts of money at specific points in time, much of financial advice focuses on selecting specific investments, such as mutual funds and stocks, and assembling them into portfolios. These activities are often guided by the investor's risk tolerance and other portfolio preferences, such as a predilection for domestic securities, as well as the investor's capacity for taking risk. It is not always clear how the selected portfolio relates to the financial goals that presumably it will help fund.

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Paul Kaplan

Paul Kaplan  Paul Kaplan is Director of Research for Morningstar Canada.

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