Every investor has different objectives when investing in stocks. The unstated fact is everyone wants to make money. However, some wish to make fast and quick money while others take it slowly.
Below are 4 different investment objectives most investors have in mind.
1) Income: Investors with this goal in mind want to make income from their investments. They want the income for their everyday expenses. Stocks that provide good high dividends are suitable for this objective.
Tip: Invest in Blue – Chip Companies because of their steady and timely dividend payouts.
Definition of Blue – Chips Companies: A Blue - Chip stock is the stock of a well-established company having stable earnings and no extensive liabilities.
2) Conservative Growth: This objective, also known as wealth building, is the objective to build an investment portfolio that will make money over the long term by capital appreciation.
Tip: Invest in stocks that have low-risks as you intend to earn money in the long run; you want to move slow and steady without taking risks.
Definition of wealth building: An investment strategy designed to increase one’s net worth over time.
3) Aggressive Growth: This objective refers to an investor who has a goal to produce large short - term and long - term capital gains. Usually, investors with this objective do not expect to be paid much dividends or totally not at all.
Tip: Invest in stocks that provide a high return, however, these investments with high returns are usually commensurate with high risks.
4) Speculation: This is the objective of an investor who buys and sells stocks often solely to profit from short - term price fluctuations.
Tip: Riskiest among all objectives. It is important to have an appetite for risk with this objective.
Introduction: Ever asked how much money should you actually allocate for stocks, bonds etc.? Below will very briefly give you a few ideal allocations experts think are useful.
Definition of Asset Allocation: The systematic placement of investment dollars into carious classes of investments, such as stock, bonds, and cash equivalents.
Definition of Bonds: A bond is a debt security, in which the authorized issuer owes the holders a debt and is obliged to repay the principal and interest at a later date.
Definition of Cash Equivalents: Short – term investments that are virtually like cash because of their high liquidity and safety.
Suggested Asset Allocation:
1) Rule of Thumb: Many investment advisors recommend investors the below allocation.
Allocation Detail: A percentage of total assets equal to 100 percent minus your age.
Example: If you are 45 years old, 55% of your investment assets should be in stocks.
2) Traditional & Static: Alternative asset allocation mix suggested by investment experts / advisors.
Allocation Detail: 55% stocks, 35% Bonds, 10% Cash Equivalents.
Note: Above suggested asset allocations are not fixed; it should be adjusted according to your needs.