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Investor Groups and Suggested Investment Asset Allocation Portfolio Model

In order to select the right portfolio of investments you should clearly identify your financial goals, income situation and tax bracket as well as where you want to be in financial terms. You should also keep in mind that your needs and lifestyle as a whole will change with the course of time. So these changes should be reflected with the appropriate adjustments in your investment portfolio.

The following are different portfolio structures that are suitable for various groups of investors. Study them carefully and see which one is the most suitable for you.

Young Professionals

The financial goal of these investors is to maximize both long and short term growth of their assets. Young professionals are in advantageous position relative to the other groups of investors since they have enough time ahead of them. Additionally, they don't have any dependents for whom to take care of and no supplement income needs. That is why they can afford to take higher levels of risk. We recommend the following for their investment portfolio:

  • Aggressive growth and growth funds - these will allow them to maximize their capital returns over the long and short-term.
  • Tax-free money market funds - these will allow them to make savings and reduce taxes that their current income is subject to.
  • Automatic monthly investments - these should be started immediately when the young professional starts to invest in order to increase his/her returns.
  • IRAs / retirement plan - these will allow young professionals to maximize the income that is free from taxation.

Working Family with Young Children

The financial goal of these investors is to pursue long-term growth without incurring unnecessary and high risk. Working families have dependents for whom they have to take care. The latter includes provision of a home and money for children's education. They should also think about their retirement years. Since couples' incomes are combined, this leads them to a higher tax bracket and as a result they have to look for ways to alleviate their tax burden. We recommend the following for their investment portfolio:

  • A combination of aggressive growth and growth funds.
  • Moderately conservative municipal bond funds and tax-exempt money market funds - these will allow them to maximize income of a safety and exempt of taxes character.
  • Automatic Investments

Peak Earners with Older Children

The financial goal of these investors is to achieve current income and long-term growth of their capital. They also strive at the decrease of tax liability. The investors in this group have reached some stability in their income levels. Their children are nearing their college education, so money is needed for its financing. Additionally, considerations about retirement years should be made. We recommend the following for their investment portfolio:

  • Growth and income funds - these will allow them to achieve capital growth.
  • Income funds / municipal bond funds - these will allow them to maximize their after-tax income.
  • US Government money - what is left after the investment in the options above should be allocated for this investment.

Empty Nesters

The financial goal of these investors is to achieve growth in their capital and their focus is on current income. Stability is also an important factor for empty nesters. These investors don't have any dependents to look after and have reached a particular stage in their career. As a result they look for safer and more conservative funds that provide for exempt from taxes income. Additionally, they need to continue to accumulate money fro their retirement years, so growth funds can be a good option. We recommend the following for their investment portfolio:

  • Moderately conservative short-term and long-term municipal bond funds - these will provide them with income that is exempt form taxes.
  • Growth funds and money market funds - these will provide them with cash reserves.

Retirees

The financial goal of these investors is to ensure safety of principal and they have focus on their current income. Now is the time to enjoy the fruits of the money you have accumulated throughout your working days. Retirees' focus is no the preservation of the principal. Another priority is current income. Since as a retiree you fall in a lower tax bracket, concerns about taxes are no longer of great importance. We recommend the following for their investment portfolio: 

The equal division of investments among:

  • Conservative US Government funds
  • Money market funds
  • Moderately conservative bond and income funds
  • Aggressive income funds
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