Elements Of An Investment Plan

The prospective investor not only must appraise his own personal factors, but he must carefully define his objectives before he can make a beginning. This means that he must come face to face with his over-all needs as related to degree of risk, rate of return, possibilities of growth, marketability, and liquidity. For example, a young investor will more likely stress growth at a sacrifice of return, while a middle-aged person will place greater emphasis upon adequate current income. As one elderly investor so well and so tersely said: "Of what use is the growth factor to me when I am not even sure that I will live to see the growth accomplished?" Lifetime objectives such as travel, retirement, estate building, establishment of a trust, needs for current income, and the like must all be considered.

The reader may well ask if all such objectives may be realized simultaneously. The answer must be a qualified one: perhaps. As we shall see shortly, each investment has associated with it certain investment characteristics which may or may not make our objectives possible of achievement. For instance, the "growth factor," which simply means the increase in the value of the invested principal with the passage of time, is the most difficult of attainment and very likely will entail the most risk. In our development of an investment program we will first proceed on the assumption that Mr. J. Q. Citizen may very well do without this objective, and we will then show how his program may be modified later to include it.