What is my investing style?
Before we get into individual styles, there are two things you must know about yourself. One – you are worth more than you think you are. Two – you can become a millionaire, a multi-millionaire or a billionaire. How do you become a billionaire? One step at a time. You have to be true to yourself and determine the best way to maximize your portfolio based on your investing style.
Conservative Investor – Under no circumstances could you live with losing any of your principal invested. You are quite comfortable with knowing that each month your money earns a fixed rate of interest. So Government Securities are your best friends. But before you get too comfortable, know that you have not outsmarted risk. The biggest challenge you face is not beating inflation and so your earning power is still at risk.
Moderate Investor – You like a little risk mixed in with a great deal of safety because you understand that some risk drives your portfolio to greater returns. If the stock market moves down a little, it may bother you somewhat, but at least you can rely on your fixed deposits to balance out the effects and keep your money growing. If the stock market moves up, you get the benefit of fantastic returns with the safety blanket of fixed income.
Aggressive Investor – Your stomach is made of cast iron. You want the maximum return for each dollar invested. Stocks of all types are your cup of tea because when the market moves up, you know that your returns will outstrip any other investment by leaps and bounds. And you not going to lose sleep if the market moves down because you have invested for the long term and can recover from any losses experienced.
What is my net worth?
Step 1 - Determine your Assets
- Cash - This includes funds held in current accounts, savings accounts, money market accounts, Treasury Bills, fixed deposits, and the cash value of life insurance policies.
- Investment accounts Stocks, bonds and mutual funds held. For overseas-based clients include annuities and 401(k) accounts.
- Personal Assets - These include antiques, art, motor vehicles, boats and state of the art electronic equipment.
- Real Estate - This section includes your home and other properties held for resale or rental.
- Business Interests - This would consist of your primary business, silent partnerships or loans made to other businesses.
- Other sources of wealth
Step 2 - Determine Your Liabilities
- Short term debts - These are your current bills. Include rent, credit card balances outstanding, personal loans payable in less than three years, income and real estate taxes and insurance. Even if you pay off your credit card statement each month, include this figure in your calculations.
- Long term debt - Your mortgage and other loans that is due over a period of more than three years.
Step 3 - Calculate your net worth
ASSETS –LIABILITIES = NET WORTH
Now you know where you are on your road map. How far are you from your objectives?
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