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Investment strategies at different stages of your life

The links for the articles:

The financial planning process is fundamental to securing investment goals for both the short and long term. This process can span over a long time frame. Investment goals are influenced by age and family composition. The articles consider the financial objectives and investment strategies at different stages of the life of an investor. I have found the articles to be very insightful as we shall encounter particular investment decisions at different points in our lives.

Investing in young children

It is often forgotten that there is an investment strategy for young children. The goal here is for parents to accumulate wealth in order to have a lump sum of funds available for tertiary education. The time frame under consideration is usually around 18 years. The investment strategy should involve taking an aggressive stance by weighting the investment portfolio heavily in equities. The extended time frame should allow for the absorption of market fluctuations and facilitate investment changes dependent on the life situation of the parents.

When you are in your 20s and 30s

These investors are usually starting their first job and are either considering marriage or starting a family. The goal here is to accumulate wealth for future prosperity. A mistake often made is to invest too conservatively as individuals that have just started a job do not have access to large amounts of capital. However even investing a small amount each month can have a profound impact over the long run. Investors should target a more aggressive investment strategy while they are younger which allows them to build personal wealth. These strategies include investment in domestic equity funds, investment in international firms and even buying real estate. Safer investment options can also be considered which include high interest savings accounts and money market funds. Although retirement seems to be a long way away, investors should consider the amount that they are able to contribute to retirement accounts given their financial position.

When you are in your 40s and 50s

Investors in this category have a greater earning power relative to earlier in life. This implies that they have more money to invest in retirement accounts as planning for retirement becomes more vital. An investment strategy here involves maximizing contributions to one or more retirement accounts such as an individual retirement account or a company-sponsored retirement fund. Retirement accounts can offer tax advantages that are unavailable in ordinary savings and investment accounts. Investors should be conservative due to wealth preservation becoming a priority as one grows older. Investment in bonds and government-backed securities should be considered as they provide safety as well as liquidity.

When you are in your retirement years

Wealth protection is of utmost importance as investors should determine an appropriate level of income that is required to maintain a certain lifestyle. Investors can now make use of the wealth that has been generated by their retirement and investment accounts over the years. This can be used to fund living, healthcare and recreational expenses.


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Investing Rule of Thumbs

Some interesting rule of thumbs that individuals can use for investment.

  • “120 Minus Your Age” Rule. The percent that you should typically invest in stocks is 120 minus your current age. That is for a 22 year old, 98% of their portfolios should contain stocks.
  • 10, 5, 3 Rule. This is a handy rule that states that you can expect a nominal return of 10% from equities, 5% return from bonds and 3% return on highly liquid cash and cash-like accounts. Of course, this is a an average return over the long haul.
  • Don’t buy a house that costs more than 3 years’ worth of your gross annual income. Some variations say no more than 2 years; others say 2.5 years.
  • 4% Withdrawal Rule. In order to protect your principal when you start withdrawing from your investment portfolio, use the 4% rule to figure out how much you can take out.
  • To retire comfortably, your investments must generate 70% to 80% of the income you received while working. or;
  • Save 20 times your gross annual income for retirement
  • Your emergency fund should equal 6 months’ worth of household expenses.
  • You should have at least 5 times your gross salary in life insurance coverage.
  • The 20/4/10 rule for buying a vehicle. When buying a car, you should put down at least 20 percent. You should finance the car for no more than four years and spend no more than ten percent of your gross income on transportation costs
  • The Rule of 72 states that you can divide the number 72 by whatever yield you are getting to see how long it would take for your investment to double.

It must be noted that these are just general rule of thumbs and do not apply accurately in every situation due to changing market conditions. Here are the links for more information:

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Investment strategies meant as buffers to volatility may have deepened it.

“The cure is proving to be nearly as bad as the disease”- Landon Thomas Jr.

The link for the article:

In summary, the article talks about how Wall Street’s investment strategies to protect investors from risk have backfired and have actually contributed to the recent market volatility. The investment strategy had involved investing large sums into risk-parity funds and E.F.Ts. It is feared that investors, anxious about the poor returns, will start selling out of their positions and send stock prices plunging.

The author also states that China’s decision to weaken its currency has also lead to the turmoil experienced in the market. Bonds, which were meant to provide stability in investor portfolios, have declined in value. Central banks in China and other Asian countries have then made matters worse by “selling out of their positions” in U.S Treasury securities, in an attempt to defend their weakening currencies.

On the other hand, the article ( suggests that as Wall Street panics, many American individual investors are not yet worried about their investments. They are not planning on adjusting their investment strategy because they expect stock prices to rebound.

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On Investment Strategy

Quite an entertaining article at the link:

The author develops a hypothetical TV interview to distinguish between active and passive investment strategies. The author concludes with some words of caution, that investors should be aware of the risks and low odds of success for active investors, and one should also maintain a substantial amount to be invested passively over the long term.

How does one choose the split though? Perhaps one has an affinity for active investing and finds the analysis required for passive investing boring. I find this aspect as important as other factors which should determine the most suitable investment strategy and assets to invest in. Other factors could include the age and lifestyle of the investor, as well as their current or future commitments. I guess it could be argued that investment should only be subjective to the point of providing for the particular investor’s set of financial needs, detached from everything else that isn’t deemed a necessity to consider, a mechanical, purpose-driven framework to base one’s investment decisions. Where’s the fun in that?

On a brighter note, in an attempt to make passive investing seem less dull, I found an article which highlights a few considerations when changing investment strategies which could be applied to an active investment strategy as well.

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China’s global investment strategy

Hi, the article below shows China’s investment strategy.  In short China has been investing in emerging markets both in Africa and Latin America. It goes to troubled countries and support their manufacturing sector since it wants their resources.

It’s main priority has been to build a strong relationship with the European Union, regardless of its weak state now. This is because Europe has good management, low political risk, High Tech companies and its not their strategic rival like United States.China is encouraging innovation which requires big investments and technology acquisition from Europe and the United States.

What makes China’s investment strategies controversial for many countries is that they don’t always appear well-intentioned. China has human rights problems at home and is engaged in worrisome expansionism in Central Asia and the South China Sea.



The list medical schemes won’t give their members

Today’s article on MoneyWeb sheds some light in a potential dark corner in Medical schemes.

In essence, Medical Schemes are required by law to cover a list of 26 Chronic illness, medical emergencies, plus an additional 270 conditions, however it seems near impossible to get this 270-long list from medical schemes, and thus difficult if not impossible to confirm that you are not paying for services that should be provided free of charge..

This is very interesting and makes one wonder about fair treatment, or perhaps it is just a lack of understanding (and communication?), either way it will benefit members if addressed.

Even more relevant given our upcoming debate!

See more here: