The four seasons in an investor’s life

The four seasons in an investor’s life

An investor's life is very dynamic. The seasons of investing lifecycle keeps changing like the seasons in a year. It goes through the four seasons of spring, summer, autumn and winter with investment styles and strategies differing in each season. Starting early on the investment journey enables us to enjoy each season to its fullest. Whereas a late start will lead to a very compressed spring, summer and autumn, followed by a very long winter.

Spring
Spring is the time when we are young and carefree. Our investing life has just started and we don't have enough disposable income after paying for all expenses. However its important at this stage is to invest small amounts regularly and set it aside for long term. The amounts could be insignificant, but over a long term like 25 years it will accumulate to a tidy sum. Spring is also a time of discovery and learning. This is a time to understand companies and learn how to decipher a balance sheet. It is also a good time to start reading about investing, so that we will be ready for summer. Generally speaking, this is when we do some small-time investing as training for the future.

Summer
At this stage our disposable income is high though not yet in the millionaire list. Summer is a time when we can be very aggressive with our investments. We may not have large loans and a family to worry about at this point, and this means that we can put a larger portion of your investment capital into high-risk, high-return investments. Further with a long earning period ahead we can take a few risks to increase the quantum of our portfolio.

Autumn
Our earning is in prime during autumn. In the transition between summer and autumn, we may have gained some major debt in the form of a housing loan and family responsibilities like children to put through college or taking care of our parents. But our increasing earning power may make a light job of these heavy responsibilities. If we have prepared well in spring and summer, autumn will be the most profitable season as far as investments are concerned. Autumn calls for a shift in investing strategy and churning of portfolio. At this stage of life our risk taking ability lowers. So some of the high-risk investments should move to stable investments. This is also the stage when we will feel tempted to splurge because of relative financial security, but being cautious helps as winter is not far away

Winter
Our earning days are over and a leisurely winter stretches ahead after a busy life in the days gone by. Our stable investments are giving steady returns. We have sufficient insurance cover for our medical needs. We venture into equity investments to enhance returns after adequately providing for our annual expenses. At this stage we may want to give part of our investments to our children and grand children. So this is also the time to re-look at our will.

As we sit back in your armchair, basking in the warmth of financial security we think back to those first steps we took way back in the spring and realize that planning for the seasons of your investing life wasn't so hard to do. In fact, it was almost natural.

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