According to an investment dictionary, “investment objective” is the financial goal or goals of an investor. It will guide an investor to decide where to invest his or her money and how.
Every type of Investment has it’s objectives and will appeal to different classes of people, hence everyone should know what they are looking for before committing their funds into anything.
Four most commonly used investment objectives are Capital Preservation, Income, Growth & Speculation.
Normally, unit trusts or mutual fund describes its investment objective clearly in its prospectus. They also will identify the strategy the fund manager follows to meet that objective. Investors SHOULD look for and invest in funds,stocks, businesses whose stated objectives are compatible with their own goals.
The table below define each investment objective.
|1||Capital Preservation||a conservative investment strategy characterized by a desire to a avoid risk of loss|
|2||Income||strategy focused on current income rather than capital preservation|
|3||Growth||investing in securities with strong earnings and/or revenue growth or potential|
|4||Speculation||taking a larger risk, usually by frequent trading, with hope of higher than average gains|
These investment objectives relate to risk levels. The risks are going higher from 1 to 4 and also the same with the investment return.
It’s no new saying that high risk investment come with higher returns. But how do we know which investments have higher return with higher risk and vice versa.
Use this QUIZ to determine your Risk Profile.
There are 3 level of investments risks namely conservative, moderate and aggressive with potential return ranging from 3 percent and up to 20 percent. The most commonly type of investments from lowest to highest potential returns are government securities, fixed deposits, bonds, investment linked insurances, equities and options/warrants.
So what is your Investment Objective and what is your Risk temperament? I am for capital preservation and growth!