Four Investment Objectives

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In broad terms, four main investment objectives cover how you accomplish most financial goals. While certain products and strategies work for one objective, they may produce poor results for another. Most people have long- and short-term financial planning needs, so it's likely you will use more than one of these strategies at the same time with no conflict.

Capital Appreciation

Capital appreciation is concerned with long-term growth. This strategy is most common in retirement plans where investments work for many years inside a qualified plan.

However, investing for capital appreciation is not limited to qualified retirement accounts. If this is your objective, you are planning to hold stocks for many years and let them grow within your portfolio, reinvesting dividends to purchase more shares. A typical strategy involves regular purchases.

Do not be concerned with day-to-day fluctuations, but keep a close eye on the fundamentals of the company for changes that could affect long-term growth.

Current Income

If your objective is current income, you are most likely interested in stocks that pay a consistent and high dividend. You may also include some top-quality real estate investment trusts (REITs) and highly-rated bonds.

These products produce current income on a regular basis.

Many people who pursue a strategy of current income are retired and use the income for living expenses. Other people take advantage of a lump sum of capital to create an income stream that never touches the principal, yet provides cash for certain current needs (college tuition, for example).

Capital Preservation

Capital preservation is a strategy often associated with elderly people who want to make sure they don’t outlive their money.

Retired or nearly retired people often use this strategy. For this investor, safety is extremely important—even to the extent of giving up return for security.

The logic for this safety is clear. A retiree who loses money through foolish investment is unlikely to get a chance to replace it.

Investors who want capital preservation tend to invest in bank CDs, U.S. Treasury issues, and savings accounts.


The speculator is not a true investor, but a trader who enjoys jumping in and out of stocks.

Speculators or traders are interested in quick profits and use advanced trading techniques like shorting stocks, trading on the margin, options, and other special methods.

Speculators have no love for the companies they trade and may not know much about the underlying firm except that the stock is volatile and ripe for a quick profit.

Many people try speculating in the stock market with the misguided goal of getting rich. It doesn’t work that way.

If you want to try your hand, make sure you are using money you can afford to lose. It’s easy to get addicted, so thoroughly understand the real possibilities of losing your investment.

The Bottom Line

Your investment style should match your financial objectives. If it doesn’t, get professional help in dealing with investment choices that match your current life and the one you desire.