Yesterday, when I wrote the post about life insurance, I referred to a book by G. Victor Hallman and Jerry S. Rosenbloom called Personal Financial Planning
The authors make a very good point that making investment decisions without defining your objectives is like trying to steer a ship without a rudder. They claim that investment objectives are shaped by:
- A person’s overall financial position
- Investment constraints
- Many other personal factors
Your objectives will change over time. Therefore, your investment policy should change too.
Here’s a list of common investor objectives:
- Maximum Current Income
- Preservation of Capital
- Reasonable Current Income with Moderate Capital Growth
- Long-Term Capital Growth
- Aggressive Capital Growth
- Tax-Advantaged Investments
Usually, retirees have this objective. They focus primarily on yeild.
This is the objective of people who do not want to lose any principal. This is usually a very rigorous investment policy.
This is often a retiree’s objective too. It is a less-stringent form of the first objective. People with this objective want their capital to grow to meet future needs, but also desire current income now.
This is the typical objective of someone during their working years.
This also is typically the objective of a person during their working years. Unfortunately, it is also the objective of someone who is getting close to retirement and is trying to make up for lost time.
The objective here is to invest in a way as to decrease the amount of taxes from investments.
Those are the most common investor objectives. Some investors might even have more than one objective. Regardless, by knowing your objective and investing accordingly, you will most likely have greater piece of mind in your investing adventures.
Tags: Investor Objectives, Investing
