Mental Accounts, Target Investment And Personal Investment Planning,

The most important thing of personal investment planning is to build a portfolio and allocate assets according to individual investor's goals and risk preferences. Traditional Markowitz investment portfolio theory suggests a single mean-variance model which can not satisfy individual investor's goals and actual attitudes towards risk. Furthermore, the premises of Traditional portfolio theory are not consistent with the actual conditions of individual investor. It is extremely necessary to search for a new way to build portfolios on the basis of Traditional portfolio theory.With the help of behavioral finance theory, especially the research into mental accounting, this paper reveals right understanding of mental accounting leads to better understanding of individual investor's goals and risk preferences which are the core issues in the investment portfolio. Further, this paper suggests the use of goal-driven investment in the portfolio construction, that is, building portfolios according to individual investor's different goals. Goal-driven investment use VAR to measure the risk that individual investor faces to better reflect individual investor's risk preference. Construct portfolio in the way of goal-driven investment can overcome some behavioral biases of individual investors and achieve better portfolio management effect.