Allocate Your Assets. DEVELOP YOUR FINANCIAL PLAN
Asset allocation is the assignment of your funds to different investment
asset classes such as money market funds, bonds, stocks, real
estate, gold, options, and futures. Your particular asset allocation
plan depends on several factors such as your time horizon, tolerance
for risk, and personal financial situation.
(a) Asset allocation plan for a married couple in their thirties.
(b) Asset allocation plan for a married couple in their midforties.
In general, the younger you are, the greater can be your allocation
toward capital growth investments (common stocks and real
estate). The closer you are to retirement, the greater should be your
allocation to bonds and money market securities, which provide
income, and the smaller should be your allocation to stocks, which
provide growth to the portfolio. Figure 1–3 gives two examples of
asset allocation plans: The first is for a married couple in their
thirties who are investing primarily to build a retirement fund over
30 years. The second is for a couple who are in their mid-forties,
indicating a slightly reduced percentage allocated to stocks with a
20-year time horizon to retirement.
Asset allocation plans are evaluated periodically when your
personal financial circumstances change. Table 1-3 illustrates guidelines
for determining your particular asset allocation plan.
How to Determine Your Asset Allocation Plan
Financial planners use this rule of thumb method for determining the percentage to
allocate to stocks:
Percentage amount to allocate to stocks = 100 – your age
For example, if you are 65 years old, you would allocate 35 percent to stocks and
divide up the balance to other investment asset classes (bonds and money market
securities). This is the starting point to your plan, where the categories will be
adjusted for your financial circumstances and risk tolerance.
Categories in Trading Mistakes
Lack of Trading Plan
Planning plays a key role in the success or failure of any endeavor
Using too much Leverage
Determining the proper capital requirements for trading is a difficult task
Failure to control Risk
Refusing to employ effective risk control measures can ensure your long-term failure
Lack of Discipline
A lack of discipline can destroy even the most talented and best prepared trader
Useful Advices to Beginning Trader
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All about Stocks
Encyclopedia about Stocks. That you should know about Stocks before starting
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