What are the different types of investment objectives? What are the appropriate investments for each objective? Why is this important?

Question

What will be an ideal response?

Answer 1

There are five investment objectives: growth, income, liquidity, security, and tax deferment/avoidance. If you won the lottery and won $5 million, you would probably want to invest it. Before you run out and invest it in the stock market (and possibly lose it all) you need to identify your objectives because that will dictate the appropriate investment. High-growth stocks, new companies, and real estate would be best for the growth objective. T-bills and other government securities, as well as bonds and blue-chips, would be best if your primary objective was a steady and predictable income. If security is very important to you, then your investments should focus on the less risky areas such as savings bonds, certificates, or T-bills. Some investors are very concerned about liquidity and how quickly they can turn the investment into cash. For those investors T-bills and stocks are best. If taxes and tax deferment/avoidance are primary issues then you should consider government and municipal bonds.