Objectives of Investment

Each investor tries to maximise his welfare by choosing the optimum combination of risk and expected return in accordance with his preference and capacity.
Investors’ objectives 

  • Maximisation of return
  • Minimisation of risk
  • Hedge against inflation
  • Savings kept as a cash are barren(unproductive)
  • Don't earn anything
  • Loses its value due to rise in prices, since inflation erodes the value of money
  • If the investment can not earn as much as the rise in prices, the real rate of return would be negative
Actual return realized from an investment may different from the expected return – risk
  • Government securities- low risk[practically risk free]
  • Debentures and preference shares-medium risk
  • Equity shares- high risk