Answer to Question #179178 in Economics for RENOLDA

Question

Define and give (three) examples of each that show the differences between an investment objective, and investment constraints, and investment policy.

Answer 1

An investment objective is a set of goals an investor has for their portfolio.

For example, safety, income, and capital gains are the big three objectives of investing.

Investment constraints are both restricting conditions and also a specific component of a formal investment policy statement which are a set of guidelines by which financial funds are managed by both public and private institutions. For example, tax, liquidity, time horizon etc.

An investment policy is any government regulation or law that encourages or discourages foreign investment in the local economy, e.g. currency exchange limits.