Does the make-up of a client’s portfolio depend in part on the objective, be it retirement, saving for college or planning for emergencies?

Anjali Jariwala, a CFP and the principal of FIT Advisors in Chicago, practices goals-based investing.

For example, she may set a more aggressive allocation for a couple in their 30s saving for retirement, because there is a long-time horizon before they need to draw on those funds. For shorter-term goals, such as a new home purchase or college funding, Jariwala may select a more conservative allocation so that the principal stays somewhat intact.

“I would not say there are necessarily different investments, but instead the make-up of equity-to-fixed-income may vary depending on the goal,” she said.

Mark Paccione, a CFP and the director of investment Research at CAPTRUST in Raleigh, North Carolina, said that the portfolio objective “certainly influences” the best investment types to use in particular situations.

For example, parents who use 529 college savings plans to save for their children’s educations are usually limited to the mutual funds available in a particular program.

For rainy-day portfolios, investors should use low-risk investments with daily liquidity, such as money market accounts, certificate of deposits and ultra-short bonds, so that they can access funds in the event of a sudden emergency, Paccione said.

“For longer-term investment objectives, investors can utilize investments that have higher risk levels, whether risk means volatility, drawdowns or illiquidity,” he said. “Private real estate is a good example of a long-term investment that is not risky based on volatility, but instead the higher returns come from higher illiquidity risk, often a lack of transparency and often concentrated property risk.”

Access to a rainy-day fund, for example, may be needed quickly and with little notice, so it should consist of investments that can be easily converted to cash without penalty, said Michael Stritch, senior vice president and national head of investments in the U.S. at BMO Private Bank in Chicago.

A retirement portfolio, by contrast, is typically drawn down slowly over time, thus allowing investors to take advantage ‎of strategies that have more restrictive provisions for accessing capital.

Sometimes retired clients can be a little more aggressive in their portfolios, depending on the objective, said Rosa Ybarra, a CFP and senior financial planner at Tranquility Financial Planning in McAllen, Texas.

For instance, if a client is in his or her 80’s and would like to leave $1 million to the grandkids, then a more aggressive strategy would be employed than would for a normal retired individual. The accounts would most likely contain higher-paying dividend securities and other growth investments.

“In knowing all the client’s goals, the better an adviser can design the asset allocation and can best evaluate each investments’ location,” Ybarra said.

This story is part of a 30-30 series on building a better portfolio.