Investment Objectives
“Never Depend On Single Income. Make Investment To Create A Second Source”
– Warren Buffet
The Key Investment Objectives.
Come Across Various Investment Goals For Smarter Future Planning
The aforementioned quote is a very apt one that widens the horizons of our perspective towards investment and makes us think about the beneficial possibilities extended by making timely investments. In this piece of information, we will come across various investment objectives for your hard-earned money to not sit idle and create opportunities for gaining returns in future. As investment is really crucial for future financial planning and security, we see the volume of investors (small, medium, and big) growing with each passing day. But, investments are to be done smartly as there are various types and mediums to invest your money – this depends on what your investment pursuit is and also on various factors like your age, risk resistance, expectations, etc. So, let us hop onto the next section to know more about the objectives of investment.
What are the Investment Objectives?
For anything we do, we are always trying to fulfil a particular objective – and when it comes to investing, things are similar. Being an investor or a to-be investor, it is very imperative to know your objectives – as it would enable you to have clarity on what types of investments to go with and make the most of. Also, knowing your investment objectives will help you prepare for the financial adjustments that you must inculcate. Coming to the types of investment objectives, we can bifurcate them into primary objectives – Security and Safety, Wealth Gain, and Second Income Source; and secondary objectives – Liquidation and Tax Savings. Let us elaborate upon these objectives so that you can identify your investment purpose and gain a clearer picture of the planning you need to execute.
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Security and Safety
There is a segment of investors who are too repellent of taking risks and their appetite for risk is very low; almost none. So, for such investors, there are low-risk investment mediums like money market instruments, bank securities, government bonds, etc. In such types of investments, though the loss factor is substantially minimal, the profit margin is very minimal too. You must be aware that any investment cannot be totally free of risk, and for the same reason, proper research and in-depth knowledge of the asset (considered for investment) is a must. So, for the investors who want their capital amount to be safe and sound with almost no scope of risk of losses, they can go with the mentioned investment options and nurture their pursuit of capital security and safety.
Wealth Gain
It is needless to mention that wealth gain is one of the most prominent objectives for a person to make investments. In a way, earning wealth is the primary goal for any person – be it through doing a job, a business, or an investment that aims for capital gain. So, we will be looking at the ways through which capital gain could be achieved and profits can be maximised. The first way is through conservative growth – this is the process in which an investor creates an entire investment portfolio by making multiple investments through purchasing commodities, bonds, stocks, shares, cash equivalents, mutual funds, etc. An investment portfolio may also include investments in real-estate properties or any other private investments.
The second type of gaining capital profits is by creating an aggressive investment portfolio. The reason why it is called ‘aggressive investment’ is that the risk involved in such investments is higher due to the market fluctuations but if these investments go right, profits earned could be outsized. So, for the investors who are ready to take risks and are willing to indulge in high beta stocks, aggressive investment is definitely a way to capitalize on their investment portfolio with substantial margins. Still, we cannot deny that this approach is comparatively sensitive. This may not be an ideal way for investors whose primary pursuit is to safeguard their money and be safe. The third type of approach is by practising and implementing speculative investment. This type of asset purchasing involves high risk as the investor is focussing on the price fluctuations. This means that the investor is purchasing the assets by predicting the fluctuations – so, if the fluctuation goes the investor’s way, profits can be made.
Gaining capital is a very subjective matter that involves thorough research of the market and the stocks or shares that are considered for investments. If you are an investor who is pretty good at forecasting the nature of the market and predicting the graphs, you can opt for any of the investment options according to your investment objectives.
Second Income Source
Generating another source of income is one of the most sought objectives for investors. An investor can generate such an earning through yields, dividends, interest, etc. – but the risk and stability involved in these types of investment are larger, so, if you have a good risk appetite and are aiming for higher returns, you can head towards such investments. The best instance of such an investment would be the stock market. The equation of this is simple – the higher risk involved is directly proportional to higher returns or loss.
Now, let us look at the secondary investment objectives in the below section.
Liquidation
Liquidity refers to the process of instant conversion of assets into cash through selling off or trading immediately – this is done to minimize the risk of loss and bring in the sense of investment security. It must be noted that the ease of liquidity of assets and securities vary from one to another. Purchasers can use this type of transaction during emergencies as it offers the scope of instant liquidity thus letting the investor meet immediate financial requirements.
Tax Savings
The taxes on your salary or income is different from the taxes on the profits earned through capital gains – and these are generally lower. And due to this tax-saving aspect, people are much attracted towards making investments. Also, there are investment options like tax-free saving accounts or the National Pension Scheme that benefits people the most when it comes to tax savings. So, to get off the tax burden, you must indulge yourself in researching for the investments that would fetch you the best range of tax savings.
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