Evaluation of Customers - Investment Objectives

This section refers to general investment objectives, not the client's specific needs such as retirement at a certain age or college plans for his/her children (see the next section on capital needs). However, there is certainly a correlation between the two, and it is useful to know the characteristics of each of these investment goals:

  • Preservation of capital - the investor is more concerned with safety than return. Treasury bills and money market funds may be most appropriate.

  • Current income- the investor needs a portfolio that produces steady income for current living expenses. Bonds, annuities, and stocks with high dividends (such as utility stocks) may be appropriate.

  • Tax-exempt income - the investor's

  • Growth and income - the investor is looking for a portfolio that generates some amount of income, but he/she is looking for capital appreciation as well (often for protection against inflation). Appropriate investments could include a mix of bonds and stocks.

  • Capital appreciation - the investor's goal is likely retirement or another event in the future, where growth is required and current income is not needed. A diversified stock or mutual fund portfolio is appropriate.

  • Aggressive growth - the investor is looking for high-risk investments with a potential for very large returns. This is rarely the goal for an entire portfolio, but rather for a specific portion of assets. Aggressive growth funds and small-cap issues may be most appropriate.
FINRA Conduct Rule 2310


Related Articles
  1. Professionals

    Current Status and Financial Goals

    FINRA/NASAA Series 66: Section 3 Current Status and Financial Goals. This section is about helping clients meet their financail goals by refering to their investment objectives.
  2. Professionals

    Current Status and Financial Goals

    NASAA Series 65: Section 11 Current Status and Financial Goals. In this section current status and financial goals: preservation of capital, current income, growth and income, growth and speculation.
  3. Professionals

    Equity Funds

    FINRA Series 6: Section 10 Equity Funds. This section deals with different types of equity funds: growth funds, income funds, aggressive growth funds and growth and income funds.
  4. Bonds & Fixed Income

    Safety and Income: Why Focus on Safety and Income?

    By Brian PerryWhen constructing a portfolio, an investor must choose which investment objectives to focus upon. Possible objectives include: principal appreciation, income generation and principal ...
  5. Bonds & Fixed Income

    Safety and Income: Caveats Regarding Safety and Income

    By Brian PerryWhile focusing upon safety and income is appropriate for many individuals, it is important to realize that there are some drawbacks to this approach. These shortcomings also mean ...
  6. Professionals

    Portfolios

    Find out how portfolios are constructed and how to evaluate their performance.
  7. Bonds & Fixed Income

    Satisfy Your Investment Objectives With Income Funds

    Discover the various categories of income funds and the types of investors for whom they are appropriate.
  8. Options & Futures

    Basic Investment Objectives

    You might know about different asset types, but do you know how each type contributes to a particular goal?
  9. Retirement

    The Best Way To Build Your Retirement Portfolio

    If you're near retirement or already there, it's time to change your investment goals from growing assets to using them to generate income. Here's how.
  10. Determine Your Retirement Objectives & Goals

    Now that you know what you have and where everything is, you may think that it’s time to take action. But in order to do that, you need a plan, and that requires knowing what kind of investor ...
RELATED TERMS
  1. Current Income

    The investment objective for a moderately conservative portfolio ...
  2. Income Investment Company

    A money management firm whose primary investment goal is to generate ...
  3. Capital Appreciation

    A rise in the value of an asset based on a rise in market price. ...
  4. Capital Growth

    The increase in value of an asset or investment over time. It ...
  5. Portfolio Investment

    A holding of an asset in a portfolio. A portfolio investment ...
  6. Growth And Income Fund

    A mutual fund or ETF that has a dual strategy of capital appreciation ...
RELATED FAQS
  1. How can I find tax-exempt mutual funds?

    Learn about finding tax-free mutual funds at major investment firms, including how tax-free funds work and what you should ... Read Answer >>
  2. What are the main advantages of fixed income securities?

    Learn why the addition of fixed income securities are common among investors who are attempting to limit their exposure to ... Read Answer >>
  3. What are some safe fixed-income investments?

    Learn what types of fixed income securities provide investors with safe options for protecting principal and providing steady ... Read Answer >>
  4. Can mutual funds only hold stocks?

    Learn about which types of mutual funds consist of only stocks, which may include stocks in addition to other assets and ... Read Answer >>
  5. What is the difference between portfolio management and financial planning?

    Understand the difference between financial planning and portfolio management, and learn which financial professionals can ... Read Answer >>
  6. Why are simple-interest loans preferred by payday loan companies and pawn shops?

    Learn how you can invest in the corporate bond market without investing a large amount of capital through bond funds and ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center