objectives of Investment

Define the concept and objectives of Investment.

Concept of Investment

Investment refers to the allocation of money or resources into assets, ventures, or financial instruments with the expectation of generating future returns. It involves committing capital to projects, businesses, stocks, bonds, real estate, or other opportunities that may yield profits or income over time. Investment can be classified into different types, such as financial investments (stocks, bonds, mutual funds) and real investments (property, machinery, infrastructure).

In other words Concept of Investment

Investment refers to the process of allocating money, time, or resources into financial or real assets with the expectation of generating future benefits or returns. It involves committing capital to ventures such as stocks, bonds, mutual funds, real estate, or businesses to earn profits, dividends, interest, or capital appreciation over time.

Investments can be categorized into:

1. Financial Investments – Investing in financial instruments like stocks, bonds, mutual funds, and fixed deposits.
2. Real Investments – Allocating capital to tangible assets like real estate, gold, or machinery. objectives of investment

Investment decisions are influenced by factors such as risk tolerance, expected returns, time horizon, and financial goals. It plays a crucial role in wealth creation, economic growth, and financial security.

Objectives of Investment

Investment objectives vary depending on an individual’s financial goals, risk tolerance, and time horizon. The key objectives include:

1. Capital Appreciation – To grow the value of investments over time, leading to wealth accumulation. In such an objective, capital is to increase for the future. Because our present money is what we have, its value will decrease in the future due to inflation. So capital appreciation is required. objectives of investment
2. Income Generation – To earn regular income through dividends (stocks), interest (bonds), or rent (real estate). Which adds money in the present money.
3. Capital Preservation – To protect the principal amount from potential losses and maintain financial stability. To keep saving money is the primary task of investors. objectives of investment
4. Liquidity – To ensure investments can be easily converted into cash when needed. Because some investments can’t be converted into cash immediately as land investments.
5. Risk Management – To balance risk through diversification and investing in different asset classes.
6. Tax Efficiency – To minimize tax liabilities by choosing tax-saving investment options. As government security, post office bounds.
7. Inflation Protection – To invest in assets that outpace inflation, maintaining purchasing power over time. Inflation increases day by day which decreases the purchasing power of money. So throughout the investment, such problems can be avoided. objectives of investment
8. Diversification – To reduce risk by investing in a variety of asset classes and sectors. As equity, debentures, FD, jewelry, bounds, insurance and contributions.
9. Retirement Planning – To secure financial stability post-retirement by investing in long-term wealth-building assets. objectives of investment

Investors may prioritize one or a combination of these objectives based on their financial situation and investment strategy.

Conclusion of Investment Objectives

Investment objectives serve as a guiding framework for individuals and organizations to make informed financial decisions. Whether the goal is capital appreciation, income generation, risk management, or liquidity, understanding these objectives helps investors align their strategies with their financial needs and risk tolerance. You can check the syllabus of portfolio management for BCom-VI under gndu on the official website of Gndu.

A well-planned investment strategy considers factors such as time horizon, market conditions, and diversification to achieve a balance between risk and return. By selecting the right investment avenues, investors can safeguard their wealth, combat inflation, and ensure long-term financial stability. Ultimately, achieving investment objectives leads to financial growth, security, and fulfillment of both short-term and long-term financial goals.

Important questions of Portfolio Management

1. What is rupee averaging technique?
2. What are the tools for portfolio revision?
3. Discuss the concept of portfolio selection.

objectives of investment