Investment objective
Also known as: investment goal
An investment objective is the primary financial goal an investor wants a portfolio to achieve, such as growth, income, capital preservation, or speculation. It anchors every suitability determination a financial professional makes.
An investment objective describes what an investor is trying to accomplish with their money. The standard categories are capital growth (increasing the value of the portfolio over time), income (generating regular cash flow from dividends or interest), capital preservation (protecting principal from loss), liquidity (keeping funds accessible), tax reduction, and speculation (accepting high risk in pursuit of outsized returns).
Objectives map to investments. A growth objective points toward common stock and equity funds; an income objective toward bonds, preferred stock, and dividend-paying equities; preservation toward Treasury securities, money market funds, and insured deposits; speculation toward options, leveraged strategies, and volatile sectors. Many investors blend objectives — for example, "growth and income" — and objectives typically shift from growth toward income and preservation as retirement approaches.
Investment objectives sit at the center of suitability. Regulations require firms to gather a customer's investment profile — objectives, time horizon, risk tolerance, financial situation, and liquidity needs — and to have a reasonable basis for believing each recommendation fits that profile. A recommendation that contradicts a customer's stated objective is a classic suitability violation, no matter how attractive the investment looks.
Because suitability is tested everywhere, investment objectives appear on nearly every securities exam. The Series 6, Series 7, and Series 66 all present scenario questions describing an investor's goals and ask you to select the matching investment — so learn which products serve each objective.
Key takeaways
- An investment objective is the investor's primary goal: growth, income, preservation, liquidity, tax relief, or speculation.
- Each objective maps to typical investments — growth to equities, income to bonds and preferreds, preservation to Treasuries and money markets.
- Objectives are a required part of the customer investment profile used for suitability determinations.
- Recommending against a customer's stated objective is a suitability violation.
- The Series 6, 7, and 66 exams test matching investors' objectives to appropriate products.