Application of Behavioral Portfolio Theory in Goal-based Investing

Behavioral finance examines how psychological factors impact investor behavior and decision-making. Within this realm, Behavioral Portfolio Theory (BPT) suggests that investors approach their portfolios in a segmented manner, often constructing multiple mental accounts to achieve specific goals.

Consider an investor who wishes to meet two financial objectives: saving for a child's college education and planning for a comfortable retirement. Using the principles of Behavioral Portfolio Theory, describe how this investor may construct their portfolio. Be sure to discuss how their objectives might influence the choice of asset allocations and risk levels.