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Objectives of Investment

Investing involves allocating funds with the expectation of achieving various financial goals. These goals can be broadly categorized as follows:

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Income

  • Dividend/Interest: Investments can provide regular income through dividends (for equity investments) or interest (for debt investments).

Capital Appreciation

  • Conservative Growth: Investing in assets that offer steady and reliable growth over time.
  • Aggressive Growth: Targeting higher returns by investing in more volatile assets.
  • Speculation: Engaging in high-risk investments with the potential for significant returns in a short period.

Forms of Returns

  • Cash Receipt: Direct income received from investments.
  • Capital Gain: Profit from the sale of an investment at a higher price than its purchase price.

Safety and Security of Funds

  • Investments should ensure the principal amount is safe and protected from undue risks.

Risk

  • The possibility of losing some or all of the invested capital. It is inversely related to the safety of funds.

Liquidity

  • The ease with which an investment can be converted into cash without significantly affecting its value.

Tax Consideration

  • Understanding the tax implications of investments, which can affect the overall returns.

Purpose

  • The underlying reason for investing, such as retirement, purchasing a home, or funding education.

Classification of Investments

Investments can be classified based on their nature, features, and the returns they offer:

  1. Physical Investments : Investments in tangible assets like real estate, gold, or commodities.

  2. Financial Investment : Investments in financial instruments such as stocks, bonds, mutual funds, etc.

  3. Marketable and Non-Marketable Investments : Marketable Investments that can be easily sold or traded in the market. and Non-Marketable Investments that cannot be easily sold or converted into cash.

  4. Transferable and Non-Transferable : Transferable Investments that can be transferred from one individual to another.Non-Transferable Investments that cannot be transferred and are held by the original investor until maturity or liquidation.

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