Something to
consider as
you organize you investment portfolio is the ratio of growth to
conservative
investments within your portfolio. These days, financial planners,
brokers
and advisors have fancy computer programs designed to impress with
precise
ratios for growth vs conservative investments you need to have in your
portfolio. Flashy as these prograns are, they aren't really
necessary..
Using
the KIS* Formula
(*keep
it simple):
Instead of laying
out good
money and or spending hours with a financial wizard learning to asses
your
personal risk profile you can come up with a fast and easy
approximation
that will work out just as well. A quick formula for working out your
appropriate
level of risk is to subtract your age from 100.
For
example: If you
are 45 years old, 100 – 45 = 55
In that case:
55% of your
investments
ideally should be in growth investments and
45% in
conservative investments.
As you get
older your exposure
to growth investments should be reduced. Logic is if there was a market
downturn you wouldn't have the years required to rebuild your
portfolio.
There is nothing wrong with growth investments provided they are within
the overall portfolio strategy you are using to grow your assets.
Balance
and diversity are good tools to employ.
Considerations:
Every investor
should know
the details of what they own, why they own it and what they hope to
achieve
with their investments as well as understanding their personal timeline
to achieve those objectives.
Too many people
do not take
the time to educate themselves and are at risk of being taken to the
cleaners
by unscrupulous "advisors" whose interest may be different from their
own.
Be careful! People regularly lose large
sums of money due
to not knowing their situation and just taking advice "carte
blanche".
Doing your own homework is very important and rewarding. A financial
advisor
for the most part should confirm what you have already learned from
educationg
yourself. Take the time to be well informed.