{"id":1557,"date":"2009-07-23T09:35:04","date_gmt":"2009-07-23T13:35:04","guid":{"rendered":"http:\/\/club.ino.com:80\/trading\/?p=1557"},"modified":"2009-07-23T09:35:04","modified_gmt":"2009-07-23T13:35:04","slug":"6-investing-rules-revisited","status":"publish","type":"post","link":"https:\/\/wwwtest.ino.com\/blog\/2009\/07\/6-investing-rules-revisited\/","title":{"rendered":"6 Investing Rules Revisited"},"content":{"rendered":"

Today I'd like everyone to welcome Mike from The Financial Blogger<\/a>. Mike's main focus on his blog is teaching the best way to control yourself and your money at the same time. Frugality isn't a bad word and in this lesson you'll learn some pretty good tips. Please enjoy the article and let your voice be heard in the comments.<\/p>\n

=====================================================================<\/p>\n

If You Are Young, You Should Invest the Biggest Part of Your Portfolio into Stocks<\/p>\n

There is an old rule saying that to determine the portion of stocks to be held in your portfolio, you simply have to take the number \u201c100\u201d and deduct your age. Therefore, being 27, I should hold 73% of my portfolio in stocks and only 27% in bonds and other fixed incomes. This old rule of thumb is based on the fact that the more you age, the less time you have to recuperate from a market drop.<\/p>\n

Technically, this rule is not stupid as you should maintain a high percentage of stocks when you are young since it has been proven that stock markets perform over the long term (read more than 15 years). However, there is something stronger than rationality: emotions.<\/p>\n

<\/p>\n

Regardless what your age is, you may or may not like risk. I have seen people that are 27-30 with a conservative portfolio. While I could have pushed them to accept more risk and invest a bigger part of their portfolio into stocks, I prefer to explain them that they would have to put more money aside to assure themselves a comfortable retirement.<\/p>\n

When young averse risk investors are influenced by financial advisors and change their investor profile to \u201cfit the plan\u201d, 2 things can happen:<\/p>\n

#1 They will suffer from anxiety and lack of sleep!<\/p>\n

#2 They will pull out all their investments at the worst moment (in the middle of a market drop).<\/p>\n

In both cases, this will have a bad influence on their retirement plan (it will either decrease their life expectancy or seriously damage their portfolio!).<\/p>\n

If You Are Young, You Should Invest the Biggest Part of Your Portfolio into Stocks; Revisited:<\/p>\n

There are also other factors to consider when you think about your investor profile:<\/p>\n

- Your job<\/strong>. This is the emerging trend in the financial academic world. University teachers (such as Moshe Milevski from York University) suggests considering the type of job you have before selecting your investor profile. Therefore, someone working for a government or as a teacher (very stable income) should invest a bigger portion of his investment into stocks. On the other side, salesmen with commission should think about investing mostly in fixed income in order to reach a balance.<\/p>\n

- Your Resources<\/strong>. If you are making 6 figures income and you are 30, you should not worry too much about your investments. You have other means to support your lifestyle. After all, you have a good 30 years in front of you to build your assets.<\/p>\n

- Other assets<\/strong>. If you have shares in a private company, rental properties or if you run a small business on the side, you should consider those assets as stocks when doing your asset allocation. There is a big debate about rental properties. I personally see them as privileged shares, so you can also think about them as fixed income.<\/p>\n

The main factor to determine your investor profile will always remain your risk tolerance. However, considering the above mentioned factors will surely help you understand a more realistic and complete asset allocation.<\/p>\n

This post was written by The Financial Blogger<\/a>, a 27 year old financial planner who writes about his own personal finance situation and how he manages it. He also gives his take on investing strategies and the stock market.<\/p>\n

Find the full 6 investing rules revisited:<\/p>\n

Part 1: Stocks Always Go Up<\/a>
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Part 2: Blue Chips Are Safe Investments<\/a><\/p>\n

Part 3: Diversification allows reducing portfolio risk<\/a><\/p>\n

Part 4: Gold Goes Up When Stock Markets Go Down<\/a><\/p>\n

Part 5: You Are Better Be a Owner than a Renter<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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