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Last week in Financial Woman’s Short & Simple Investment Tips, I began a series on investment objectives, beginning with capital preservation. To refresh your memory, investment objective is lingo for goal; what is the main outcome or goal you have for an amount of money you are looking to invest? This is the first question individual investors should ask before beginning their search for the best investment; it’s the starting point, and the four main investment objectives are:
- It’s not lost
- It grows in value
- It provides income
- A combination of any of the above
Remember from last week that capital preservation is the lingo for keeping your money and not losing it. This week let’s look at capital appreciation as an investment objective. Again, we have some lingo here; capital appreciation is a long and fancy phrase for growth. If you have a sum of money that you are looking to invest, and the main outcome you want from that investment is for it to grow, then you would look for investments with capital appreciation as the main objective.
For you, this may mean that you tell your financial advisor that capital appreciation is your main objective when she asks. If you make your own investment choices, then you would probably use some type of mutual fund research service or financial magazine, either online or at the library, and look for this specific objective. This is not something that is difficult to find; the investment objective is listed as a main category in mutual fund research and easily seen.
Of course, we all want all of our money to grow, but think of money that you invest with capital appreciation as the money that you are going to put aside and not touch for a long time. You won’t need it to live on, and it needs to be alright if the value fluctuates some, because growth type of investments tend be more volatile. Capital appreciation is commonly the primary objective for retirement money for someone who has a long term time frame, or someone who has plenty of wealth for a portion of their portfolio. Some common investments with a capital appreciation objective include growth stocks, real estate bought at the right time in the cycle, and small business investments, with either angel investing or venture capital funds.
To reach our financial goals, like all other goals, we have to first start with the desired outcome we want and work from there. Again, we see that life principles apply to investment principles; you already know a lot about investing from other life experiences. It’s just a matter of beginning to think with a financially empowering mindset and embracing those investment principles. Investment objectives are covered in depth in my 7 Steps investing course if you want to learn more. I hope you’ll join me as I cover the other investment objectives in my weekly Short & Simple Investment Tips delivered right to your email inbox.