Investment objective is the fundamental reason for investing. Every single investment vehicle can be categorized according to three primary objectives – safety, income, and growth. The argument that an amount of money has no purpose and is just being invested for investment sake is quite mistaken. Usually, the situation is that the individual has yet to define the investment objective for his disposable income.
Any objective that cannot afford you even a pesewa’s loss on your invested money, falls under security and will need relatively safe investment vehicles. In this case, government securities (treasury bills, government bonds, etc.) are viable.
An individual looking to make periodic gains on his invested amount will need to look for interest paying securities. In Ghana, the most common interest paying securities return on a monthly or quarterly basis. These include money market instruments like commercial paper, certificate of deposit (CD) and banker’s acceptance. An objective of income may also mean that one may be more conscious of the yield (rate of return) than of security.
Growth naturally suggests long-term. An individual seeking growth may not be concerned with initial low yields if there is a promise of growth over time. Stocks that have a record of performing over the years may be the preferred investment option for this investment objective.
A COMBINATION OF ANY
An investment objective may not strictly be one of the above but a combination of any. However, the advantages of one comes at the expense of other. Blue chip stocks or equity mutual funds for example can be a one-stop shop for reasonable safety, income and potential for growth.
Determining your own investment objective enables you to match it with that of the security you intend to buy by assessing its level of appropriateness. A licensed financial advisor can help, contact one today.
You may send comments, questions or suggestions if any to [email protected] and @richmondkwamefrimpong across all social media platforms