Question

Recommend three investment objectives for short-term investments. When you answer this you can expect that your answers will repeat. Please create a table and put your DQ in this form. Across the top use the following columns: Objective Description: Impact of Objective: Negative Consequence of Objective: Ease of Implementation You will have three rows...you can create the table and cut and paste it to the response site.

Answer 1

The three major investment objectives of short term investments are:-

1) Providing returns which are in line with money market instruments with considerable less risk profile

2) Ensuring liquidity so that these investments can be liquidated when required

3) Ensuring that the principal is protected and there is no default risk

Objective	Description	Impact of objective	Negative consequence of objective
Ensuring principal protection	Short term investments are normally made to park the money before deployment somewhere else. So it is of utmost significance that principal is protected in these investments	Investments are made only in safe funds	Chances of getting higher returns are foregone in an effort to minimize risks
Get moderate returns with low risk	The focus is on getting returns which are in line with fixed income markets and with no volatility	Only the good quality bonds or commercial papers are chosen for investment	Low rated bonds are typically avoided and hence chances of higher returns goes down
Ensure liquidity	Investments should be liquid to exit any time and cash out the investments made	The impact being that only liquid and well traded securities are chosen for investments	The basket of securities which are suitable for investment drastically reduces due to all the filters