Basic Investment Objectives

Investing is a wide spread practice and many have made their fortunes in the process. The starting point in this process is to determine the characteristics of the various investments and then matching them with the individuals need and preferences. All personal investing is designed in order to achieve certain objectives. These objectives may be tangible such as buying a car, house etc. and intangible objectives such as social status, security etc. similarly; these objectives may be classified as financial or personal objectives. Financial objectives are safety, profitability, and liquidity. Personal or individual objectives may be related to personal characteristics of individuals such as family commitments, status, dependents, educational requirements, income, consumption and provision for retirement etc.

The basic objectives of investment can be classified on the basis of the investors approach as follows:

  1. Short term high priority objectives: Investors have a high priority towards achieving certain objectives in a short time. For example, a young couple will give high priority to buy a house. Thus, investors will go for high priority objectives and invest their money accordingly.
  2. Long term high priority objectives: Some investors look forward and invest on the basis of objectives of long term needs. They want to achieve financial independence in long period. For example, investing for post retirement period or education of a child etc. investors, usually prefer a diversified approach while selecting different types of investments.
  3. Low priority objectives: These objectives have low priority in investing. These objectives are not painful. After investing in high priority assets, investors can invest in these low priority assets. For example, provision for tour, domestic appliances etc.
  4. Money making objectives: Investors put their surplus money in these kinds of investment. Their objective is to maximize wealth. Usually, the investors invest in shares of companies which provide capital appreciation apart from regular income from dividend.

Every investor has common objectives with regard to the investment of their capital. The importance of each objective varies from investor to investor and depends upon the age and the amount of capital they have. These objectives are broadly defined as follows.

  • Lifestyle – Investors want to ensure that their assets can meet their financial needs over their lifetimes.
  • Financial security – Investors want to protect their financial needs against financial risks at all times.
  • Return – Investors want a balance of risk and return that is suitable to their personal risk preferences.
  • Value for money – Investors want to minimize the costs of managing their assets and their financial needs.
  • Peace of mind – Investors do not want to worry about the day to day movements of markets and their present and future financial security.

Achieving the sum of these objectives depends very much on the investor having all their assets and needs managed centrally, with portfolios planned to meet lifetime needs, with one overall investment strategy ensuring that the disposition of assets will match individual needs and risk preferences.