{"id":25431,"date":"2013-05-16T17:52:29","date_gmt":"2013-05-16T12:22:29","guid":{"rendered":"http:\/\/vskills.in\/certification\/tutorial\/?p=25431"},"modified":"2024-04-12T14:18:11","modified_gmt":"2024-04-12T08:48:11","slug":"investment-objectives-and-constraints","status":"publish","type":"page","link":"https:\/\/www.vskills.in\/certification\/tutorial\/investment-objectives-and-constraints\/","title":{"rendered":"Investment Objectives and Constraints"},"content":{"rendered":"\n

Investment Objectives and Constraints<\/strong><\/h4>\n\n\n

\u00a0<\/p>\n

Investment Constraints
<\/strong><\/p>\n

When creating a policy statement, it is important to consider an investor’s constraints. There are five types of constraints that need to be considered when creating a policy statement. They are as follows:<\/p>\n

    \n
  1. Liquidity Constraints\u00a0<\/strong>–\u00a0<\/em>Liquidity constraints identify an investor’s need for liquidity, or cash. For example, within the next year, an investor needs $50,000 for the purchase of a new home. The $50,000 would be considered a liquidity constraint because it needs to be set aside (be liquid) for the investor.<\/li>\n
  2. Time Horizon<\/em><\/strong>\u00a0–\u00a0A time horizon constraint develops a timeline of an investor’s various financial needs. The time horizon also affects an investor’s ability to accept risk. If an investor has a long time horizon, the investor may have a greater ability to accept risk because he would have a longer time period to recoup any losses. This is unlike an investor with a shorter time horizon whose ability to accept risk may be lower because he would not have the ability to recoup any losses.<\/li>\n
  3. Tax Concerns<\/em><\/strong>\u00a0–\u00a0After-tax returns are the returns investors are focused on when creating an investment portfolio. If an investor is currently in a high tax bracket as a result of his income, it may be important to focus on investments that would not make the investor’s situation worse, like investing more heavily in tax-deferred investments.<\/li>\n<\/ol>\n
      \n
    1. Legal and Regulatory<\/strong>\u00a0–\u00a0<\/em>Legal and regulatory factors can act as an investment constraint and must be considered. An example of this would occur in a trust. A trust could require that no more than 10% of the trust be distributed each year. Legal and regulatoryconstraints such as this one often can’t be changed and must not be overlooked.<\/li>\n
    2. Unique Circumstances\u00a0<\/strong>–\u00a0<\/em>Any special needs or constraints not recognized in any of the constraints listed above would fall in this category. An example of a unique circumstance would be the constraint an investor might place on investing in any company that is not socially responsible, such as a tobacco company.<\/li>\n<\/ol>\n
      \n

      Apply for Portfolio Manager Certification Now!!<\/h3>\n

      http:\/\/www.vskills.in\/certification\/Certified-Portfolio-Manager<\/a><\/p>\n<\/div>\n\n\n

      Back to Tutorial<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

      Investment Objectives and Constraints \u00a0 Investment Constraints When creating a policy statement, it is important to consider an investor’s constraints. There are five types of constraints that need to be considered when creating a policy statement. They are as follows: Liquidity Constraints\u00a0–\u00a0Liquidity constraints identify an investor’s need for liquidity, or cash. For example, within the…<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"footnotes":""},"categories":[2080],"tags":[4759,4760,4758],"class_list":["post-25431","page","type-page","status-publish","hentry","category-portfolio-management","tag-constraints","tag-investment-objectives","tag-investment-objectives-and-constraints"],"acf":[],"yoast_head":"\nInvestment Objectives and Constraints - Tutorial<\/title>\n<meta name=\"description\" content=\"Investment Objectives and Constraints\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.vskills.in\/certification\/tutorial\/investment-objectives-and-constraints\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Investment Objectives and Constraints - 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