Your financial advisor will work closely with you to understand your investment objectives. The following is a brief description of commonly used terms to describe different investment objectives.
Preservation of capital
Primarily seeks preservation of capital.
Seeks to maintain current income from investments over time.
Growth and income
Seeks both capital appreciation and some current income.
Seeks capital appreciation through buying and holding securities over an extended period of time.
Seeks short-term capital gains through buying and selling securities over a short period of time.
Your financial advisor will help you understand your risk tolerance. The following are commonly used words to describe risk tolerance.
The least tolerant of all risk levels. Investors who have a low level of risk tolerance are willing to accept lower investment returns in exchange for minimal risk and volatility. Similarly, investors with conservative levels of risk tolerance tend to concentrate on investments with minimal price fluctuation and minimal exposure to loss of investment principal.
The moderate risk tolerance focuses on average investment risk. Investors with a moderate risk tolerance are willing to accept a substantial amount of market risk and volatility for the potential of higher investment returns.
An aggressive approach to risk is typically the most tolerant of all risk levels. Investors with an aggressive level of risk tolerance are willing to accept a substantial amount of market risk and volatility for the pursuit of potentially high investment returns.
Speculation uses short-term market trends and short-term growth potential. The securities in a speculative investor’s portfolio will have above-average risk that offsets the potential for short-term gains. Such a portfolio also has the potential for short-term losses.