Life Cycle and Wealth Cycle Stages - FIND YOUR CATEGORY

Life Cycle and Wealth Cycle Stages - AN ANALYSIS

The life cycle stages of an investor can be classified as follows :
o Childhood stage
o Young unmarried stage
o Young married with children stage
o Married with older children stage
o Pre-retirement stage
o Retirement stage

· The income level of investors, the saving potential, the time horizon and the risk appetite of the investor depend on his life cycle.

· Younger investors have higher income and saving potential, take longer term view and may be willing to take risks.

· Older investors may have limited income and saving, shorter time horizon, and unwilling to risk their savings.

· There are 3 wealth cycle stages for investors :

o Accumulation stage is when investors are earnings and have limited need for investment income. They focus on saving and accumulating wealth for the long term. Equity investments are preferred in this stage.

o Transition stage is when financial goals are approaching. Investors still earn incomes, but have also draw on their earnings. Investors choose balanced portfolios that have both debt and equity.

o Reaping stage or distribution stage in when investors need the income from their investment, and cannot save further. They reap the benefits of their savings. They prefer debt investments and preserving of capital at this stage.

· Inter generational fund transfer refers to transfer of wealth to an investor. The preferred investment avenue will depend on the life cycle and wealth cycle stage of the beneficiaries.

· Sudden wealth surge refers to winnings in games and lotteries. Investors should be advised to temporarily park their funds in money market investments and create a long term plan after thinking through the plan.

And Finally affluent investors are of two types :
Wealth preserving investors who are risk averse and like to invest in debt.

Wealth creating investors who prefer growth and are willing to take the risk of equity investments.

RAJIV KAPOOR
9839034761