COBIT EDM02.01 - Establish The Target Investment Mix

by Abhilash Kempwad


Establishing the target investment mix is a critical practice in the world of finance and business management. It involves determining the ideal allocation of resources to different investment opportunities to maximize returns while managing risk effectively. By setting clear targets and guidelines for investment allocation, organizations can ensure a well-balanced and diversified portfolio that aligns with their overall strategic goals.

Factors To Consider When Establishing The Target Investment Mix - EDM02.01 For Ensured Benefits Delivery

Factors To Consider When Establishing The Target Investment Mix EDM02.01 For Ensured Benefits Delivery

There are several key factors to consider when determining the appropriate mix of investments for your portfolio.

  • Risk Tolerance: One of the most important factors to consider when establishing the target investment mix is your risk tolerance. This refers to your ability and willingness to tolerate fluctuations in the value of your investments. If you have a low-risk tolerance, you may want to consider a more conservative investment mix with a higher proportion of fixed-income securities.
  • Time Horizon: Another important factor to consider is your time horizon, or the length of time you expect to hold your investments. Generally, the longer your time horizon, the more risk you can afford to take. If you have a long time horizon, you may be able to weather short-term market fluctuations and take advantage of the potential for higher returns offered by more aggressive investments.
  • Investment Goals: It is also important to consider your investment goals when establishing the target investment mix. Are you investing for retirement, education, or a major purchase? Your investment goals will help determine the appropriate mix of investments to help you achieve those goals. For example, if you are investing for retirement and have a long time horizon, you may want to focus on growth-oriented investments such as stocks.
  • Asset Allocation: Asset allocation is the process of dividing your investment portfolio among different asset classes, such as stocks, bonds, and cash. The key to successful asset allocation is diversification, or spreading your investments across a variety of asset classes to reduce risk. By diversifying your portfolio, you can help protect against market volatility and potentially improve your overall returns.

EDM02.01 Implementing And Monitoring The Target Investment Mix 

  • Setting Clear Investment Goals: Before implementing an investment mix, it is important to set clear investment goals. Whether the goal is to save for retirement, buy a home, or fund a child's education, having a clear goal in mind will help determine the appropriate investment mix.
  •  Assessing Risk Tolerance: Investors should also assess their risk tolerance before implementing an investment mix. Risk tolerance is the degree of variability in investment returns that an investor is willing to withstand. By understanding their risk tolerance, investors can determine the appropriate mix of assets to include in their portfolio.
  • Diversifying Asset Classes: Diversification is key to reducing risk in an investment portfolio. By spreading investments across different asset classes, such as stocks, bonds, and real estate, investors can minimize the impact of market fluctuations on their overall portfolio performance.
  • Monitoring Investment Performance: Once the target investment mix is implemented, it is important to regularly monitor the performance of the portfolio. This may involve reviewing the asset allocation, rebalancing the portfolio when necessary, and adjusting the investment mix as market conditions change.
  • Rebalancing the Portfolio: Over time, the performance of different asset classes may vary, causing the portfolio to deviate from its target mix. Rebalancing involves buying and selling assets to bring the portfolio back in line with its original allocation. This ensures that the investor's risk exposure remains consistent with their risk tolerance.
  • Adjusting the Investment Mix: As investors progress towards their goals, their financial situation and risk tolerance may change. It is important to periodically reassess the investment mix and make adjustments as needed to stay on track toward achieving their objectives.

Importance Of Regular Review and Reporting In Maintaining The Target Investment Mix

  • Ensuring Alignment With Business Objectives: Regular review and reporting allow organizations to assess whether their investment mix aligns with their overall business goals and objectives. By regularly reviewing the investments in IT projects, organizations can ensure that resources are allocated in a way that supports the strategic direction of the business.
  • Identifying Areas Of Improvement: Through regular review and reporting, organizations can identify areas where the investment mix may need adjustment. This could involve reallocating resources to projects that are more aligned with business needs, or divesting from projects that are no longer delivering value. 
  • Maintaining Compliance And Risk Management: Regular review and reporting of the investment mix are essential for maintaining compliance with regulations and managing risks effectively. By consistently monitoring investments, organizations can ensure that they are adhering to applicable laws and regulations, and proactively address any potential risks that may arise.
  • Optimizing Resource Utilization: By regularly reviewing the target investment mix, organizations can optimize the utilization of resources. This includes not only financial resources but also human resources, time, and other assets. 
  • Driving Innovation And Growth: Regular review and reporting of the target investment mix help organizations drive innovation and growth. By evaluating the performance of investments, organizations can identify opportunities for further investment in areas that show promise. 


In conclusion, establishing the target investment mix is crucial for effective COBIT practice. By carefully assessing and balancing the allocation of resources, organizations can optimize their investments in IT processes and controls to achieve strategic objectives.