March 9, 2009, 6:00 am

How to Start Investing – A DIY Growth Investment Strategy Part 4

by: The Financial Blogger    Category: Investment, Market and Risk,Trading
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-Investment Possibilities According to Your Investment Profile Part 2-

The SUV (60%-40% fixed income / 40%-50% equity)

lexus-rx-350-2010

– This is the most common type of investor: the balanced ;-). While reaching 50% in both fixed income and equity, you have plenty of managed portfolios for your need. Select one that is well diversified on countries and industries.

– If you are thinking you can tolerate more fluctuations, you can try index funds for half of your portfolio and bonds

and mortgage funds for the fixed income part (I would avoid dividend funds as they are often sell as fixed income funds but they are still integrating stocks for the most part).


The BMW M3 (30%-20% fixed income / 70%-80% equity)

– Now you are getting among the most aggressive investors. Remember that growth portfolio reached almost -25% in 2008. If you think you can handle it, you can try managed portfolios.

– However, I would more lean toward a combination of index funds, ETF’s, money market funds (for liquidity) and bond funds.

BMW M3

– If you think you can handle the pressure, dividend funds or preferred shares funds could be a good alternative for your fixed income part. They will provide a higher fluctuation than bonds or money market funds but they also provide a better return over the long run.



The Formula 1 (10%-0% fixed income / 90%-100% equity)

formula_1_3

If you are in this category of investors, it means that you are married with the market (for the better and the worst!).

– The only fixed income held in your investment portfolio should be money market funds for liquidity. This allows protecting your cash from inflation and you can withdraw this money at anytime to make your next investment move.

– If you have a systematic investment set, I suggest you purchase index funds with it. ETF’s have a lower MER’s fees but they cannot be bought on a monthly basis (without including the transaction fees). Be careful with index funds. Try to get general index (like index linked to TSX or S&P 500 or international markets) at first.

– If you prefer to trade directly, I suggest you open a brokerage account and get some trading courses (You can get great video at INO TV and Create FREE Portfolio Click Here).


images sources: Autospies, Top Machines, Wallpaper Base

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Comments

Great post!!! I love to compare my investor profile with a car hahaha Glad I’m a Lexus SUV!! However, I’m totally off my investor profile. Right now I’m the Formula 1. How can I match this? Would you suggest to sell part of my equity that performs badly or that performs well compared to the market?

Thanks!

Considering the actual market, I would suggest that you invest any new money into fixed income solutions as you would lose too much if you sell your stocks right now.

[…] The Financial Blogger » Blog Archive » How to Start Investing – A …The only fixed income held in your investment portfolio should be money market funds for liquidity. This allows protecting your cash from inflation and you can withdraw this money at anytime to make your next investment move. …  read more… […]

I don’t subscribe to that tired and silly philosophy about fixed income vs. stocks and risk vs. return. That’s just a stupid choice that financial planners came up with.

What is really awesome about your post is that it makes so much sense to use cars! I’ll take an M3, please. Thanks!

Great post!!!!

by: The Financial Blogger | March 11th, 2009 (7:19 pm)

Hey B7,
I’m a financial planner ! (I guess you choose the wrong guy 😉 ).

However, we should not use the word “risk” but “fluctuation”. Over the long term (more than 10 years), the stock market is not risky. However it will fluctuate big time!

People that don’t like to see their value going up and down must accept the low rate of CD’s !

The M3 is my favorite car ever!
If you send me 75K USD via paypal, I’ll order one for you 😉