Investment objectives are the goals you want to achieve with your investments. They act as a road map, guiding you towards choosing the right investment options and building a portfolio that suits your needs.
Here’s a breakdown of some key investment objectives:
Primary Objectives:
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Growth: This objective prioritizes increasing the value of your investment over time. This is often achieved through stocks or real estate, which have high return potential but also high risk.
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Income: This goal focuses on generating regular income from your investments. This can be through bonds, dividend-paying stocks, or rental properties. Income investments are less volatile than growth investments.
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Security: This objective prefers to preserve the principal amount of your investment. This is often obtained through savings accounts, certificates of deposit (CDs) or government bonds. These investments offer low risk but also low returns.
Secondary Objectives:
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Liquidity: This objective is focused on getting easy access to your invested capital. This can be important for short-term goals or having an emergency fund. Savings accounts and money market funds are good examples of liquid investments.
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Tax Reduction: The objective is to reduce your tax burden on investment income. Certain retirement accounts and tax-advantaged investment vehicles can help with this.
Factors affecting your goals:
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Risk Tolerance: How much risk are you comfortable with? Higher potential returns often come with higher risk.
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Time horizon: When will you need investment money? Long-term goals can bear more risk than short-term goals.
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Financial Goals: What are you saving or investing in? Retirement, a down payment on a home, or education expenses will all have different needs.
By understanding your investment objectives and the factors that influence them, you can make informed decisions about your portfolio allocation and choose investments that are right for you.
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