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DISCOVER LIFE’S THREE INVESTMENT PERIODS Palos Verdes, CA. Our investment philosophy is based on an individual’s chronological time line, which consists of three periods: (1) asset accumulation, (2) wealth building, and (3) asset conservation. The financial journey through life’s time line starts at different levels, depending on whether you were born with a plastic or a silver spoon in your mouth. As you travel through your time line, your in-vestment options change. Knowing where you are and what options are available will help you make the right choices. How and when you make these choices is what this article is all about! A WINNING FINANCIAL PLAN UP TO AGE 35 The first chronological period of your life—mid-twenties to mid-thirties—should be devoted to accumulating assets and acquiring necessities. When you’re just starting out, your assets are usually limited and the major portion of your income goes for the basic needs—food, clothing, and shelter. This is the time to save, save, save! Amass as many investment dollars as possible. Your approach to investing during this period should be through tax-deferred plans at work or Individual Retirement Accounts (IRAs). Your degree of risk should be moderate. Investments included in this category are AAA corporate bonds, blue chip stocks, and growth-oriented no-load mutual funds. Every effort should be made to purchase a home now. The advantages, from tax savings and equity buildup, historically outweigh the short-term benefits of lower monthly rent payments. Be careful when sheltering yourself and your family from liability. Only pay for protection when you’re purchasing life insurance. Purchase whole life insurance if it will yield a higher rate of return than other investments. After listening to our erCD on asset protection, you might seriously consider reducing your liability coverage. Remember, your main financial goal during this time is tax-deferred accumulation of capital. Don’t take risks with your investments. Save as much as you can so that when you enter the next phase of the time line you’ll be ready to move forward. INVESTING BETWEEN THE AGES OF 35 AND 50 After earnings have increased, assets have been accumulated, and necessities are under control, it’s time to move on. Ready or not, you must face the challenges during this aggressive investment period of your life, when you are between your mid-thirties and early fifties. THE BEST FINANCIAL PLAN FOR YOU Your best financial plan is to create the maximum wealth during this aggressive investment period of your life. Build financial security yourself. Don’t rely on others to do it for you. Many people who relied on major banks and insurance companies for financial security ended up short when these institutions failed. The social security system will not do much better. You should be careful not to over diversify your assets or adopt a “hold-back” attitude. You must concentrate your assets into one or two aggressive investments rather than spreading them out. Diversification often leads to in effectiveness. What if you fail during this period? What is your down side? If you consider your ability to bounce back because of your age, the political clout of your generation, taxes, and inflation, the real risk is minimized. Make your aggressive investments now. As you get older, your ability to rebound declines. If you do not try at this stage in your investment time line, you probably will never do it, and more importantly, you will never know whether you could have made it. WHAT IT TAKES TO BECOME WEALTHY Becoming wealthy requires taking “controlled” risks. If anyone tells you they became wealthy without taking any risks, they inherited wealth or they won the lottery. ABOUT THE AUTHOR: Eugene E. Vollucci, is the Director of The Center for Real Estate Studies, a real estate research center He is author of four best selling books and many articles on rental income investing, apartment investing, real estate and taxation. To purchase a subscription to Market Cycles and to learn more about the Center for Real Estate Studies, please visit us at http://www.calstatecompanies.com
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