How to Balance Risk, Return, and Contributions in Your Financial Plan

At Nauma, we took the idea of separating financial goals seriously. That’s why we designed our planning flow so that portfolio construction and tax planning happen at the goal level, not just at the household level. This unique approach helps you make smarter, more personalized decisions when you create your financial plan.

Before diving into the demo, let’s walk through some key concepts that form the foundation of our approach.

Finding the Sweet Spot: Returns vs. Contributions

When you build your financial plan, you’re essentially deciding how you’ll reach your goals by balancing investment returns and contributions.

• If you choose higher expected returns, you don’t have to contribute as much — because you’re counting on the portfolio’s growth to do the heavy lifting.

• If you choose lower expected returns, you’ll need to contribute more and save at a higher rate.

This naturally raises the question: Why would I want to contribute more if the market could just do the work for me? The answer lies in risk. Higher expected returns don’t come free — they’re always tied to higher risk.

Too often, people focus only on potential returns without considering risk. But as individual investors, our goal isn’t to “beat the market” or chase the highest returns possible. Instead, our real objective is to:

• Maximize the likelihood of achieving our financial goals

• Do so with reasonable effort and risk, not by taking unnecessary chances

That’s why we don’t always aim for the highest possible return. Once you understand the expected return for your portfolio, you can adjust your contributions accordingly — ensuring you don’t over-save or under-save for a goal.

Understanding the Distribution of Returns

Let’s look at the bigger picture. When you take on more risk, the range of potential outcomes for your portfolio widens. Your returns could be high — but they could also end up much lower than expected. You have to be comfortable with any point on that distribution.

By carefully managing the balance between returns, risk, and contributions, you give yourself the best chance of hitting your financial targets while avoiding common pitfalls like saving too much (and tying up resources unnecessarily) or saving too little (and falling short when you need the money).

Putting Theory into Practice

This framework sets the stage for how we built Nauma. By aligning portfolio construction and tax planning with individual goals, we help you:

• Balance risk and return in a way that’s practical

• Adjust contributions to avoid over- or under-saving

• Focus on achieving your goals — not chasing arbitrary benchmarks

With this foundation in place, let’s dive into the demo and see how Nauma makes these concepts actionable in real life.

Would you like to try this process yourself? Join Nauma.