Planning Your Financial Goals
Planning Your Financial Goals
You might have a pleasant trip but you might end up a considerable distance from anywhere you wanted to be.
At first, you should aim for growth. You don't n.eed dividend income at your age, but your future is all before you and the safest possible growth stocks are for you. Not stocks that some well-meaning friend tells you are "sure to double in a month," but solid, well-known stocks with a history of better-than-average growth, recommended by the research department of your broker. American Telephone and Telegraph or IBM are not too high a grade for you. The risk that you will lose your money in such stocks is small and their promise of gain over the years is great.
This aim will change regularly throughout your life. It might interest you to take a quick look at how it might change as you grow older.
When you finish high school, if you go on to college your aim would remain growth. Growth with safety if your parents are furnishing your college expenses, growth with safety plus dividend income if you are paying part of your own way.
If you don't go on to college, or when you are graduated from college, you will begin work and probably marry and start a family. This sort of thing has been going on for years. Under these circumstances your problem will become more complex.
We'll say there's not much money left at the end of each week for savings. Still you do have some, and this you should put into a savings account. You have insurance policies to pay premiums on in addition to other expenses. You're paying for a car, maybe for a house.
First off, you should build that savings account until there is plenty of money to tide you over if you should lose your job, be ill for an extended period, need an operation. It's better to err on the long side than on the short side when you're figuring a minimum amount to keep in the savings bank. Your family responsibilities will he increasing, not decreasing.
We'll say that above this minimum reserve fund you have about $500 a year to invest.
Well, again, dividend income isn't your primary concern. Safety is more of a concern now than it will be later because, even though you are young, healthy, with a good job, you're still low on assets, possessions. You need to build a backlog of assets.
Again the answer is common stock that nicely balances growth and safety. If it also gives a small cash dividend this would be pleasant. But you don't pick the stock for that. You pick it for growth with safety. Automatically, as a bonus, you get protection from inflation.
We'll suppose you're again a little older, a little higher on the business ladder, married, and with your first--maybe even your second--child. What then?
The goal is still growth. A little more risky, perhaps, but not much more. Your children will be, in all too few years, ready for a college education. Your investments will provide the money for their education if you and your broker plan things right. Since this is true, you can't afford highly speculative stocks because with them there is the chance that your education fund might be dealt a heavy blow by a few company failures. Thus growth, with more diversity of stocks to spread the risk, is still your goal.
You might have a pleasant trip but you might end up a considerable distance from anywhere you wanted to be.
At first, you should aim for growth. You don't n.eed dividend income at your age, but your future is all before you and the safest possible growth stocks are for you. Not stocks that some well-meaning friend tells you are "sure to double in a month," but solid, well-known stocks with a history of better-than-average growth, recommended by the research department of your broker. American Telephone and Telegraph or IBM are not too high a grade for you. The risk that you will lose your money in such stocks is small and their promise of gain over the years is great.
This aim will change regularly throughout your life. It might interest you to take a quick look at how it might change as you grow older.
When you finish high school, if you go on to college your aim would remain growth. Growth with safety if your parents are furnishing your college expenses, growth with safety plus dividend income if you are paying part of your own way.
If you don't go on to college, or when you are graduated from college, you will begin work and probably marry and start a family. This sort of thing has been going on for years. Under these circumstances your problem will become more complex.
We'll say there's not much money left at the end of each week for savings. Still you do have some, and this you should put into a savings account. You have insurance policies to pay premiums on in addition to other expenses. You're paying for a car, maybe for a house.
First off, you should build that savings account until there is plenty of money to tide you over if you should lose your job, be ill for an extended period, need an operation. It's better to err on the long side than on the short side when you're figuring a minimum amount to keep in the savings bank. Your family responsibilities will he increasing, not decreasing.
We'll say that above this minimum reserve fund you have about $500 a year to invest.
Well, again, dividend income isn't your primary concern. Safety is more of a concern now than it will be later because, even though you are young, healthy, with a good job, you're still low on assets, possessions. You need to build a backlog of assets.
Again the answer is common stock that nicely balances growth and safety. If it also gives a small cash dividend this would be pleasant. But you don't pick the stock for that. You pick it for growth with safety. Automatically, as a bonus, you get protection from inflation.
We'll suppose you're again a little older, a little higher on the business ladder, married, and with your first--maybe even your second--child. What then?
The goal is still growth. A little more risky, perhaps, but not much more. Your children will be, in all too few years, ready for a college education. Your investments will provide the money for their education if you and your broker plan things right. Since this is true, you can't afford highly speculative stocks because with them there is the chance that your education fund might be dealt a heavy blow by a few company failures. Thus growth, with more diversity of stocks to spread the risk, is still your goal.
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