Investment Objective
Candlefocus EditorWhen an investor outlines an investment objective, it will often include assets such as stocks, bonds and mutual funds, as well as strategies, such as dollar cost averaging and a mix of passive and active investments. That way, the investor can achieve their desired financial outcome and achieve their objectives over time.
The first step in setting an investment objective is to determine an individual’s risk tolerance. Generally, this is done in order to ensure that the investor’s portfolio will remain in line with their financial goals, as well as their risk preferences. To do this, investors should discuss their long-term financial goals with a financial advisor and assess their time horizon and risk tolerance. Depending on the investor’s goals, a portfolio will be created that will balance the trade-offs between return and risk.
The investor and their financial advisor must also consider the type of investments they are willing to make, as each type carries its own levels of risk and return. This may be the most important factor when it comes to formulating an effective investing plan. The investor must choose the right mix of investments that will help them reach their goals without taking on a level of risk that is not suitable for their risk tolerance.
Finally, the investor must develop a strategy in order to achieve their set of objectives. This strategy should include when the investors buy and sell investments, how much they should be investing, as well as how much liquidity they to maintain. In addition, investors should monitor their investments to insure that their objectives are still in line with their portfolio returns.
Having an investment objective is a fundamental part of individuals’ financial well-being, as it allows them to clearly identify and structure their financial goals. With the assistance of a financial advisor, any investor can undertake an effective investing plan in order to reach their desired financial objectives.