Chapter 5

Investment Constraints

What else to consider beyond return and risk objectives?

‘Nothing is more difficult, and therefore more precious, than to be able to decide.’

Napoleon Bonaparte

The two investment objectives are return and risk. Return objective defines what you want your investments to achieve – the outcome. Risk objective defines what risk level you should and can bear – the journey’s volatility.

However, you may have other considerations and constraints influencing your portfolio. Beyond the two investment objectives, consider five groups of investment constraints:

  1. Time horizon.
  2. Liquidity.
  3. Taxes.
  4. Legal and regulatory.
  5. Special circumstances.

Time horizon

Time horizon is the period over which you invest. It outlines when ...

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