In part 1 of our article, we talked about the 4 phases of the life cycle investing:
- Accumulation
- Saving
- Pre-retirement
- Retirement
During these 4 phases, the investor must:
- Assess and select investment vehicles that are suitable for their risk tolerance
- Actively monitor the investment portfolio’s performance
- Periodically review their investment portfolio to account for changes in their financial status, risk profile, and changes in the general economic environment
- Assess the impact of inflation on the client’s retirement funding requirements
The table below is a general guide to the suggested investment allocation percentages throughout the 4 phases of the life cycle.
| Life cycle Phases | Age | Low Risk, Income | Medium Risk, Growth/Income | High Risk, Growth |
|---|---|---|---|---|
| Accumulation | 20s to early 30s | 10% to 30% | 40% to 60% | 20% to 40% |
| Saving | Early 30s to mid 40s | 20% to 40% | 40% to 60% | 10% to 30% |
| Pre-Retirement | Mid 40s to late 50s | 30% to 50% | 30% to 50% | 10% to 20% |
| Retirement | Late 50s onwards | 40% to 80% | 20% to 40% | 5% to 15% |
Throughout the life cycle phases, individuals have different financial goals. These can be categorized into:
- Short-term, high priority goals (eg. wedding banquet, first home, children’s education)
- Long-term, high priority goals (eg. long-term investment, second property, retirement)
- Short-term/long-term, low priority goals (eg. exotic holidays, luxury goods, sports car)
Once you listed down your financial goals, you will be in a better position to assess your own life cycle phase and the corresponding needs and concerns.
If you need help with listing your financial goals and planning your investment allocation, do contact your trusted FLA Organization Financial Planner for personal consultation today.
