Financial Literacy: Stages of Investors
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This is the fourth in the series of Financial literacy series. Previous ones here: 1, 2, 3.
Age of an investor, family situation and health are important determinants of financial goals. Also financial goals and plans depend on the income, expenditures & cash flow requirements of an individual.
For the purpose of ideal financial planning, investors can be segmented according to certain stage in their life cycle
Stage I : Ages: 20 to 30 (Unmarried, Young Professionals)
Stage II : Ages 30-45 (Married, With or Without Kids)
Stage III : Ages 45-55 (Pre Retirement)
Stage IV : Ages >55 (Retirement)
Let’s start with the first stage: Life Cycle Stage I : Ages: 20 to 30 (Unmarried, Young Professionals)
• Continuing higher education or just started working
• May or may not own home
• May or may not have dependents
Financial Needs Are Immediate & Short Term
• May still have some support from parents
• May be saving towards future family needs - say buying home
• May be paying off education loans
• Likes to spend money
Ability to Invest :
• Limited due to higher spending
Choice Of Investments :
• Liquid plans & short term investments.
• Some exposure to equity and pension products,
• Term Insurance plan
The second stage comes in another post!
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