How can investors balance their objectives: safety, income and capital growth?

The number of persons switching to investment is increasing, due to the returns they receive from asset development despite the diversity of investment options. However, investors should take into account three main objectives, namely safety, income and capital growth.

In this report, these three worthy objectives are defined. The appropriate mix for each investor will change over time as their life circumstances and needs change.

Safety

It is said that there is no such thing as a completely safe and secure investment. But you can get pretty close. Investing in government-issued securities in stable economic systems is one.

Next in safety are AAA-rated corporate bonds issued by large, stable companies. Such securities are arguably the best means of preserving your principal while receiving a pre-set rate of interest.

Safety comes at a price. The returns are very modest compared to the potential returns of riskier investments. This is called "opportunity risk." Those who choose the safest investments may be giving up big gains.

Income

Investors who focus on income may buy some of the same fixed-income assets that are described above. But their priorities shift towards income.

Government and corporate bonds may be in the mix, and an income investor may go beyond the safest AAA-rated choices and will go longer than short-term CDs.

Income investors may also buy preferred stock shares or common stocks that historically pay good dividends.

Capital Growth

Capital growth is achieved only by selling an asset. There are many other types of capital growth assets, from diamonds to real estate, which all share some degree of risk to the investor.

The stock markets offer some of the most speculative investments available since their returns are unpredictable. But there is risky and riskier. Blue-chip stocks are generally considered the best of the bunch as many of them offer reasonable safety, modest income from dividends, and potential for capital growth over the long term.

One built-in bonus of stocks is a favorable tax rate. Profits from stock sales, if the stocks are owned for at least a year, are taxed at the capital gains rate, which is lower than the income tax rates paid by most. Many individual investors avoid stock-picking and go with one or more exchange-traded funds or mutual funds.

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