Sound Strategies for Everyone

Factors That Affect Your Investment Decisions

Once you begin saving on a regular basis, you’ll soon have to decide how to invest the money you are saving. Regardless of what financial stage of life you are in, you will have to decide what your needs are and how comfortable you are with risk.

Growth or Income

What do you need the money for? The answer to this question will help determine whether you want to put your savings into investment products that produce income for you, or that concentrate on growing the value of your investment. For instance, a retirement fund does not need to produce income until you retire, so your investing strategy should focus on growth until you are close to retirement. After you retire, you’ll want to draw income from your investment while keeping your principal intact to the extent possible.

Time and Risk Tolerance

All investing involves a certain amount of risk. How well you tolerate price fluctuations in your investments will need to be balanced against your required rate of return in determining the amount of risk your investments should carry. An offsetting factor to risk is time. If you plan to hold an investment for a long time, you will probably tolerate more risk because you have the time to make up any losses you may experience early on. For a shorter-term investment, such as saving to buy a house, you probably want to take on less risk and have more liquidity in your investments.

Sample Asset Allocations

PORTFOLIO RISK LEVEL
	Low	Moderate	Aggressive
% Treasury Bills
% Bonds
% Growth Stocks
% Small Caps
% International

Chart illustrates sample portfolio asset allocations: Low Risk (those nearing or in retirement); Moderate Risk (middle-aged investors); Aggressive Risk (younger investors).

Allocations are presented only as examples and are not intended as investment advice. Please consult an advisor if you have any questions about how these examples apply to your situation.

Sound Strategies for Everyone

Everyone lives his or her life differently, and everyone has complicated emotions about money, so investment decisions are highly personal and unique to each person. But there are some basic rules that apply to most investors.

· To provide liquidity for emergencies, you should probably always have a cash reserve in a money market fund¹ or traditional savings account or CD, no matter what your life stage.

· Also, if you can tolerate even a little risk, you should probably always have some portion of your portfolio in stocks to help protect your savings from being devalued due to inflation.

· Another good idea is scheduling annual reviews of your investments with a financial advisor. This habit will keep you up to date on your investments and help spot potential problems in your investment strategy.

· Finally, every investment decision should include tax considerations. Investments can be taxable, tax deferred, or tax free. You should be aware of the taxable status of your investments and take that into account when setting up and reviewing an investment strategy.

Дата добавления: 2015-11-16