If you are wondering how to allocate your portfolio so that you have the correct mix of products is vital. Knowing how it should look when you are in your 30’s is important because it will be different than your portfolio in your 20’s and it will make the move to your 40’s smoother. It is not going to tell you what you should be doing, because that will depend entirely on your own personal circumstances and how you have planned your portfolio. But what this article is aiming for is to give you the information on how to allocate your portfolio for your age. It is an overview of what a portfolio should look like when you are in your 30’s to help you with your money making goals.
As with any investment you will need to consider the risk that you are placing on your stock and whether that the time is right to increase or decrease the risk that you are prepared to take.
The advice that surrounds age and risk is relatively simple, at the 30 you should be putting 30 percent of your investments in less risky options. These will have obvious pitfalls in that they will not be making the best returns for your money but you need to make the right decisions for you, but you have to consider what you would have to rebuild if you made a substantial loss from your more risky options. You would still need capital and if you protect a portion of this capital in less risky investments then you will have capital if the worse was to happen, this spreads the allocation of your portfolio across different areas.
Less risky options
It is important that you look at the broad spectrum of options that you have available for less risk options.
USA Government Bonds: These bonds are considered low risk options until you realise how close America was in defaulting on some of their bonds in October.
Gilts: These are bonds that are produced in the UK.
Corporate Bonds: These bonds are created by companies and you are looking for those companies that have the highest grading possible.
One way to tell if you are looking for less risky options, the lower the coupon the less the risk, whichever option that you chose for your low risk investments it is a good idea to do your homework first, make sure you know what the payments are going to be and the end date.
Not all bonds are transferable so before you jump into the first great deal that you see it is important that you are fully aware of the full terms of the bond from the issuing company or governing body.
With the remaining 70 % of your portfolio you will need to make some decisions as to the placement of the capital. You need to consider the areas that you would like to invest the money in, and then you need to look at the options available and where you can allocate your investment in that sector.
You might like to invest in the electronic companies or you might prefer the banking section, whatever you pick you need to allocate a percentage of your capital money to that area of investment. Only once you have found a number of different areas that you are going to invest in should you then start to whittle down a list of potential investments.
You will be surprised as to the different options that are open to you and your capital. You might be restricted in certain areas of investment if the percentage of your capital is low but there are ways around this.
It is possible to be able to invest like some of the big companies with relatively low expenditure.
Some of the options that you have available include:
Bonds: There are many different bonds that are available on the market and they can vary in the risk factor. The higher the risk the better returns that you will make on your money.
ETF’s: These cost the same as a normal transaction, so there are no inflated fees. Where there is an index to track you can find ETF’s. The main aim is to track an index, and as there are many different indexes in the investing markets there are a number of different ETF’s too. With the fact that you will own shares in the companies, so will all the other people that have invested in the ETF with you, you will also have some voting rights with the shares that the ETF holds.
Stocks and shares: You can purchase the stocks and shares and you can do this through your broker account, most shares are traded on-line and you will need a place electronically with which to store your purchases.
Mutual Funds: These are run by managers and you will need to pay fees for this type of investment. The manager uses your money along with other people’s to buy a selection of different stocks and shares of different companies. Again you can chose the area and the mutual fund that you would like to invest in. The returns of the funds are available so you can judge the performance of the mutual fund. As you will be purchasing shares in this mutual fund you do have some voting rights on the shares that the mutual fund owns.
The idea behind keeping a larger proportion of your investments than you did when you are in your 20’s is due to the reduced amount of time that you will have until you reach retirement age. It is important that you are making money and if there is ever a time that you lose some of your capital you will be reassured that you still have an amount that is protected in less risky investing procedures.
The idea of investing is to grow your money over a period of time, the greater the length of time you have the more risky options are open to you. The shorter the time, the more of your money you will need to consider protecting, so that if you lose any money that you will not be completely broke and have no capital to start growing again.
What options are you choosing?