Syndicate
Investment Goals
If we have clear which is our objective it will be easier to formulate a long-term plan to reach it.
There are two basic objectives: first to accumulate capital; second, to obtain profits from those accumulated capitals.
Although many people dedicate themselves during all their working lives to the task of accumulating capital, they never see in it an investment objective. Usually, the first capital that people accumulate is money that they deposit in a savings account, and for many people, the balance of this account represents its main wealth during their entire working lives. A great number of people never pass to the second phase of capital accumulation that is generally the buying of a house.
During this journey almost everybody acquires some luxurious goods such as some jewelry, an expensive car, music equipments and other things of the kind. Many readers of this site are interested in the third phase of capital accumulation, which consists in the accumulation of financial assets. The starting point for the accumulation of financial assets is the firm purpose to systematically set apart a fraction of our income (after paying taxes) to in this way constitute the capital in which you will base your investment program. Many people cannot commit to this phase due that there might be other more attractive alternatives than the boring task of saving to accumulate capital.
How can you accumulate the necessary capital to start your investment plan? The easiest way is to put part of your income directly into a savings institution, without you seeing physically the money. Also, the money that comes to you unexpectedly such as, for example, a return from taxes or an inheritance could give you the capital needed to begin an investment program.
Once this capital is constituted you can say theta you are ready to begin the program of accumulating financial assets. Most of the parts of this site are dedicated to describe and to explain the nature of the existing financial investments. However, before selecting between the alternatives at your disposal you must answer some questions about yourself.
One of these questions is related to your character and about the degree of uncertainty and risk that you are willing to stand for. Another question that you will have to answer is the following: why are you trying to accumulate financial assets: Is it with sights to future retirement to pay for the studies of your sons or simply because you want to be wealthy and want to enjoy of the luxury and power that money gives you? You must answer this question to know the lapse of time in which you may act. That is to say, you need to know how much time you have to accumulate the exact amount of money you need to reach your goal.
Knowing the amount of money and the necessary time you need to obtain this sum, it will make it easier to select the financial products that are in accordance with your goals (shares, debentures, real estate, and others).
Once a person has fulfilled the task of accumulating the financial assets that he needs and has used them to reach their objectives, the usual thing to do is to aim on the second objective: the rents derived from the accumulated capital. This does not mean for the people to ever look during their working life for their rents that come from their financial assets, but that the majority of people can only reach their objectives through a substantial revaluation of the capital; that is, that the rents produced by this investment are not enough. (The concept of leverage; the increase of profitability without an investment increase; is the key concept and it will be studied further on in detail in the same section.)
When the investor gets older, its preferences usually change completely: he does not look for capital gains or for the expansion of his financial assets anymore, but he is interested in obtaining a maximum profitability out of the accumulated assets during all his working life.
To attend the needs of the golden year age people, investing professionals have developed a series of products that give stable and predictable rents. The investor with an advanced age must act carefully. They have to have in mind that if they get to confident, they do not have their whole life to recover if they lose their possessions because of bad or fraudulent investments.