There are three basic financial periods that anyone could go through during their lifetime. They are the foundation, accumulation and distribution years. So it's important to have a sound financial plan to met their objectives in each period.
In the foundation years are the young and single, the young married and the young family. Generally, they need to have sufficient funds for emergency. Most will have a regular contribution saving program or start up an investment program by dollar cost averaging approach. It's always a challenge to live within their means because lack of accumulated savings and source of income flow. Obtaining life and medical insurance is always an added advantage because of relatively cheaper premium and their good health status.
Those who are married with kids and heading toward their retirement are in their accumulation period.The main objective is to maxmimise any savings dollars for their children education and retirement funds. To enhance their savings dollars by saving more and employ tax-saving or tax-exempted financial instruments. Proper risk management program like their life and medical insurance need to be constantly review to ensure "no shock" to their financial well-being.
The distribution years cover the period from the beginning of retirement to the time one reached their mortality. Advanced medical can last them for a long time. Standard of living is one major concern to ensure the accumulated fund is available to maintain purchasing power of that dollar. Coming to this stage, this group of people would have some health issues, so it's better to ensure all medical insurances have already put in place, especially the medical insurance and the long term care insurance. Considering what assets to pass on to who is also another important planning goals.
The Financial Strategy for....
Foundation Years
Because they have time, long enough to gain investment return to ride on the power of compounding. Next, because of time, they can afford to take risk to ride on the market and economy cycle. The strategy is to pursue a diversified investment portfolio with en emphasis on growth, and taking on riskier investments which generally yielded higher returns.
Accumulation years
The strategy is to continue with equity-dominated portfolio to optimize it's potential growth, while gradually shifting to income investments where equity funds are slowly replaced by bond or bond funds. It is also advantageous to maximize tax-deferred plan like SRS and tax-exempt investment instruments.
Distribution years
At this stage, the emphasis is to protect the accumulated assets, to reduce overall debt and to minimize tax. Since the planning horizon is short, the strategy is to shift a large portion of assets from equity to more conservative fixed-income. To balance between growth and income, annuities, bond funds and income funds could be invested. There is still the need to keep growth-type of investments as it can be used to battle against inflation.
In the foundation years are the young and single, the young married and the young family. Generally, they need to have sufficient funds for emergency. Most will have a regular contribution saving program or start up an investment program by dollar cost averaging approach. It's always a challenge to live within their means because lack of accumulated savings and source of income flow. Obtaining life and medical insurance is always an added advantage because of relatively cheaper premium and their good health status.
Those who are married with kids and heading toward their retirement are in their accumulation period.The main objective is to maxmimise any savings dollars for their children education and retirement funds. To enhance their savings dollars by saving more and employ tax-saving or tax-exempted financial instruments. Proper risk management program like their life and medical insurance need to be constantly review to ensure "no shock" to their financial well-being.
The distribution years cover the period from the beginning of retirement to the time one reached their mortality. Advanced medical can last them for a long time. Standard of living is one major concern to ensure the accumulated fund is available to maintain purchasing power of that dollar. Coming to this stage, this group of people would have some health issues, so it's better to ensure all medical insurances have already put in place, especially the medical insurance and the long term care insurance. Considering what assets to pass on to who is also another important planning goals.
The Financial Strategy for....
Foundation Years
Because they have time, long enough to gain investment return to ride on the power of compounding. Next, because of time, they can afford to take risk to ride on the market and economy cycle. The strategy is to pursue a diversified investment portfolio with en emphasis on growth, and taking on riskier investments which generally yielded higher returns.
Accumulation years
The strategy is to continue with equity-dominated portfolio to optimize it's potential growth, while gradually shifting to income investments where equity funds are slowly replaced by bond or bond funds. It is also advantageous to maximize tax-deferred plan like SRS and tax-exempt investment instruments.
Distribution years
At this stage, the emphasis is to protect the accumulated assets, to reduce overall debt and to minimize tax. Since the planning horizon is short, the strategy is to shift a large portion of assets from equity to more conservative fixed-income. To balance between growth and income, annuities, bond funds and income funds could be invested. There is still the need to keep growth-type of investments as it can be used to battle against inflation.
