Customized Wardrobe (Portfolio)
An investment portfolio is not much different. We rely on lifestyle (risk appetite), age group (our time horizon) and activities they engage in (financial goals).
The rationale or idea behind this concept is that everyone should always take a look at what they are comfortable with given their current situation and future goals.
Let’s look at an extreme scenario of suggesting an elderly of 70 years old to plow all his retirement funds into small cap stocks. It will breach all the 3 principles of ‘buying clothes’ as summarized below:
2) Age group
E.g. if you are 45, invest 55% in equities and the balance 45% in less risky investments like cash, bonds or income trusts!
When you have a well-planned investment portfolio, you can sleep soundly through any economic cycle.
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