Investment is often generally defined as contribution of resources in order to gain more resources. The resource is usually in the form of money. Ultimately the objective of investment is to make profitable gains of money invested one way or another. It defies logic if the purpose is to make a loss.

Investment is increasingly becoming a need as much as insurance and therefore it is no longer sensible just to protect but also to seek growth. Time is not a friend of money as time moves forward the value of money usually moves backward. Earning interests above the inflation rate is one way to protect the value but it is miniscule and there are many forms of investment vehicles that could generate returns well beyond the bank rates provided you take the risks.

Although the notion of investment sounds good but it can be confusing for many. One way is to consult a financial planner for professional planning and advice. However it is wise to understand the fundamentals than being completely clueless. Be part of the game plan as you are the main driver as any experts you sought, if any, are just your navigator to assist you to arrive at your goals.

Your Goals, Your Objectives

Every invididual invest for a variety of reasons: for your dream home, your retirement, your kids or simply just want to accumulate wealth. However there is no single medium of investment applicable to all the objectives.

It is crucial that you identify your financial objectives as they set the general outline of the investment plan and lenght of time to achieve the goals.

The plan incorporates the suitable investment mediums, risk profile and the time horizon. An essential element is how long do you want your plan to go? Generally there are three time horizons which are as follow:

Short Term (0-2 years)
Medium Term (2-5 years)
Long Term (5 years or more)

Take some time and think about your time horizon.

Profiling, Returns and Risks

Most investments involve risks as expected returns are affected by a variety of factors and the desired level of return may not be achieved. Hence the famous relationship of "High Risk High Returns" which basically explains the positive relationship of risk and return.

As such, it is imperative to determine the level of return you seek and the amount of potental risk or the variablity of returns you can afford. Risk profiling is not just a necessity but an extremely crucial element that act as your point of reference of when to pull out when necessary, which further enhance the usefulness of your investment plan if used wisely.

There are different classes of assets available to match your invesment profile as highlighted above. Different class suit different objectives, rate of returns and risk levels, and the investment plan could allocate the assets accordingly. Generally, there are two broad categories of asset class:

- Growth assets
- Defensive assets

Defensive assets as the name suggest is suitable for potential investors with lower risk profile while Growth assets accomodate the opposite. And of course not to remember the level of returns are commensurate to the level of risks.

The financial industry today offers a great variety of invesment vehicles such as superannuation, mutual funds, retirement plans, investment properties, and income investments and consumers are basically spoilt for choice but selecting the right one requires careful evaluation for which the investment plan comes in handy.

The purpose of the Investment Education series is to provide a general framework of understanding investments but the principal focus will be on shares which is one of the most common and accessible investment medium available. Until then, start thinking and work out some draft outlines of your objectives.

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