Market volatility is a constant threat to investment portfolios, but a strategy called Target Investing offers a way to participate in upside while limiting downside. Developed as the second pillar of Defined Outcome Investing, this approach allows investors to choose a target percentage of market gains—such as 60% or 80%—in exchange for reduced exposure during major downturns.
The core premise is straightforward: by capping potential upside, investors gain a buffer against severe losses. For example, if the market declines 30% or more, those using a target strategy may experience significantly smaller drawdowns. This preservation of capital can be critical for high-net-worth families and retirees who rely on portfolio stability for income.
Target Investing is part of a broader framework that includes "Naked in the Market" and "Captain Buffered" strategies. Its key benefits include long-term wealth preservation, more predictable outcomes, retirement income stability, and reduced portfolio volatility.
As markets inevitably fluctuate, the ability to buy the dip while others are still recovering can accelerate long-term growth. This video from WE Alliance Wealth Advisors explains how Target Investing works and why it may be a smart addition to a diversified portfolio.