New Year objectives

The week approaching the Lunar New Year seems like a good opportunity to go back to basics. This is a time for reflection and aspiration. Here, however, we must modestly confine our thoughts to the world of investment.

And in this world it is surprising how often people get so caught up in investment matters that they lose sight of why they are there.

There can only be personal answers to questions of investment objectives, there is no right or wrong here. Among individual investors the most common investment objective is to preserve and increase a stock of wealth. Along the way there will be any number of diversions such as schooling to be financed, a home to be purchased and so on. And then there is all the other stuff that falls under the category of temptation or, as some would have it, living. There's a very big list here ranging from holidays to clothes and, well, you know the rest.

So, how does the individual juggle short and long term objectives? First these need to be clearly defined. Assuming there is surplus cash to hand after living expenses have been met, the prudent investor will establish guidelines for how much money should be set aside for the long term, generally understood to mean retirement.

The investor, in this instance, is looking for comfort and security and this is hardly likely achieved by investing in complex instruments that cause the pulse to race at an unhealthy pace.

A long-term strategy involves a look at the history of long-term investment returns and understanding total return, which means capital appreciation plus yield minus investment expenses.