Views • 8th Nov, 21
“To acquire money requires valor, to keep money requires prudence, and to spend money well is an art.”- Berthold Auerbach
How do you increase your wealth in your 20's? What about 20 years later in your 40's?
Here is a quick decade-by-decade investment guide to get you started, or help recalibrate your perspective on personal finance.
You are young and carving out a name for yourself. Start with calculating your living expenses and create an emergency fund for the next three to six months. You should maximize this habit as time goes by, because life is unpredictable.
Next, shop around different Financial Advisors and ask what type of investment portfolios they have to offer. Consider the risk to reward ratio, tax matters and how long they will hold your investments for you. If you have the time and expertise, then skip the Adviser and get into equities on your own.
When investing into equities your youth favors you greatly because you can bounce back better from a downturn in the markets.
A steady career and predictable obligations grant you flexibility to explore diversification. Start putting 10% of your income in investments. Another habit to maximize.
Diversification is the act of spreading your money across a range of assets to reduce risk. You can diversify by getting blue chip stocks, bonds and mutual funds. This is a reliable strategy because it is not so volatile. Also, if you have dependents this is a good time to get life insurance. It gets more expensive as you age and you might face late joiner penalties too.
High Value 40's
Like aged whiskey, you are entering your prime earning years. The kids are growing up and your parents retired or close to retirement. There are two things to do here…
First, assess all your assets and begin estate planning. Create or update your will.
As you get closer to retirement you need to take stock of your pensions, investments and income generating assets like property. You may need to look at your investments and reduce your risk by exchanging some of your stocks for risk averse asset classes.
Also are you on track for retirement and do you have a short fall? This is where a Financial Advisor can help.
Secondly, start an investment account for your children, make sure its 100% equity holdings, spread across different sectors and by investing each month you are achieving dollar cost averaging.
Tailoring everything to your risk appetite so that you can still get good yields.
Settled 60's and Beyond.
You have made it!
Now, you need to look at your retirement distribution strategy. What will your different streams of income be in retirement?
There are numerous strategies to try, but always talk to a financial advisor. Typically, it is recommended that you withdraw cash from a combination of savings and investment accounts. As you did before, update your will and plan for succession.
Novice or pro, there is always a solution to your money matters. It's all just a matter of perspective.
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