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Investment Objective
Written by Kenny Foo   
Tuesday, 14 October 2008 21:49

What is the objective of investing money in investment products or investment vehicles? No matter what type of investment products such as money market, mutual funds, investment-link insurance, stock, precious metal, or commodity that the investor are investing,definitely, there is some objectives that investor want to archieve.These investment objective will not run away from three factors - Safety, Investment Income, and Capital Growth.


Safety is always the most important investment objective or investment rule as you are investing your hard earned money into investment products and you do not want to lose your money in your investment.Hence, every investor will consider whether the investment products are safe and secure to invest before they invest any money into that particular investment products.To further elaborate safety objective, the investor will need to consider the liquidity of the investment products, the integrity of the investment products as well as the volatility of the investment products.Investing in good liquidity, great integrity and low volatility investment products, investor can ensure that they can turn their investment products into money at any point of time, trust the report published by the authority and won't have the chance to see their hard earned money turn into zero value.Any how, there is no completely safe and secure investment products in this world as every type of investment products come with a risk.Investment products that come with higher risk will always get higher return or higher loss.

Investment Income

Investment products can generate investment income or dividend. It is like you get money when your business generate cash for you.For instance, if a company declare to pay 3 cents dividend per share to its shareholder, investor with 1000 unit of the share will be able to get $30 as investment income or dividend.Investment income or dividend will can generate cash flow for the investor.There is a inverse relationship between dividend and safety.The safest investment products will always generate lower dividend and vice versa.Some investment income for certain investment products like property rental can come in regularly while some investment income for certain investment product like stock dividend will not come in regularly depending on company direction.

Capital Growth

Capital Growth is the potential gain from the investment products when the asset increase in value.If a stock value increase 10 cents from 40 cents to 50 cents, the investor with 1000 unit share will gain $10 as capital gain or capital growth when the investor sold off his share.Capital Growth is different with investment income as capital growth or capital gain will only realize when the investor sold off his stock with higher price.Selling his stock on lower price is consider as captial loss.Hence, capital growth cannot become an cash flow as it is not fixed, ongoing income and mostly likely will be seeked by those investors that are looking for long term growth in capital.


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Last Updated ( Sunday, 04 January 2009 18:38 )
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