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Understanding Investment Objectives

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What are Investment Objectives?

Investment objectives are the goals of an investor that they hope to achieve by building an investment portfolio. With these goals in mind, investors can decide what securities or asset classes to invest in. An investor may have more than one objective in mind; however, they must prioritise one over the other when choosing to invest their money in a specific investment. The best way to curate a portfolio is to balance the three basic investment objectives.

What are the Three Basic Objectives of Investment?

The three basic investment objectives in the financial world are safety, growth, and income. Let’s understand each in detail: 

Safety: While investing your hard-earned money to reap benefits always presents a certain amount of risk, specific investment options provide stability over the long term with fewer associated risks. However, these options often don’t accrue as much profit as the riskier options. These options are government securities, gold bonds, corporate bonds of well-settled large corporations, etc. Money market securities and bank securities are also considered safe options. Such assets provide long-term benefits at a low but stable rate. 

While these securities offer the safety of your invested money, they often come at what is known as an “opportunity risk.” When people invest in safe securities, they do so at the cost of making more significant gains through their invested money.

Additionally, there is a degree of interest rate risk. In other words, you may invest capital in a bond with a 1% return at a 2% inflation rate. You must make more to match the inflation or lose actual purchasing power. 

Growth: You’ll be willing to take risks if your objective is to double or triple the invested money, and safety doesn’t determine your investment type. Growth of your capital is possible through selling capital assets, such as stocks, real estate, commodities, etc. With such assets, the investor may receive timely dividends; however, selling these assets is necessary to make considerable gains. 

Investments in growth instruments might potentially have a higher risk of loss as it is prone to experience value fluctuations over time. Due to the unpredictability of their returns and the increased risk associated with the stock markets, they provide some of the most incredible speculative investing opportunities.

Income: If an investor is interested in getting stable income through their investment, they are looking for stable-rate, fixed-income assets. While these could offer safety, the investor’s goal is about something other than keeping their investment safe at all times and could be willing to take a certain amount of risk. Investment opportunities provided by dividend stocks, bonds, mutual funds, and ETFs can help investors provide stable income based on their risk appetite. Income-oriented investors can also carefully choose preferred stock shares or common equities with a solid dividend history.

Additional Investment Objectives

In addition to three basic investment objectives, an investor could choose a particular investment with other goals. These secondary investment objectives usually play a role when two or more securities satisfy the requirement of the basic investment objectives. 

Say two bond allows similar security and returns over time for an income-oriented investor. However, the two bonds are taxed differently. It is the investor’s interest to clarify the taxation terms on the two asset types and make a choice that allows him tax benefits. Some common investment objectives other than the ones discussed above are the minimisation of tax and liquidity.

Tax Savings: Common shareholders’ taxes differ from income taxes since they are capital gains. Taxation on capital gains is far less than the tax on interest earned or other types of regular income, such as salaries. As a result, several investors consider tax reduction while making investment decisions. For instance, a well-compensated corporate executive could look for investment opportunities with advantageous tax status to lower their total income tax obligation.

Registered programs like tax-free bank deposits and national pension schemes are the greatest options. However, there are equally efficient methods to increase profits while simultaneously reducing taxes, such as purchasing a life insurance policy or putting your money in mutual funds.

Liquidity: Liquidity is the capacity to trade immediately, sell, or exchange assets into liquid money on the market with little danger of loss. Most investors invest in more straightforward assets to sell to be used in times of need. Bonds and bond funds are examples of investments that are very liquid. In contrast, stocks are much less liquid because while they are easy to dispose of, doing so at an improper moment might result in a significant loss. Investors attempt to maintain a balance of investments in their portfolio that includes at least some readily marketable assets, if not altogether.


Investment objectives allow investors to determine the type of assets or securities to invest in based on their investment goals. Investors often combine more than one objective of investments to make decisions. Professionals often advise investors to aim for a diversified portfolio that balances safety, growth, and income to maximise profits.

Marwadi Financial Services provides its customers with a full range of services for building and maintaining wealth. Our professionals ensure that to tailor your portfolio to meet your investing goals. Furthermore, we leverage AI-based research suggestions to provide the finest guidance given your risk tolerance. To begin a well-calculated investment journey to meet your investment objectives, consult one of our experts today!

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