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Give Your Investments Six Pack Tabs

Aug 17, 2007
When retirement heats up, will your portfolio wear a t-shirt in the pool of riches or will it proudly display its core stability? For a respectable savings, the following six aspects of financial planning should be exercised.

First, remember the "Bubblegum Sacrifice Factor."

For some, concentrating on savings and chewing bubblegum proposes a dual task challenge. Yet, foregoing one piece of bubblegum every day provides a wealth of potential.

Hypothetically, one piece of bubblegum from the gumball machine costs about one quarter. Saving the quarter everyday for one year equals ninety-one dollars and twenty-five cents. Imagine, at the end of every year for the next two decades, the hypothetical investor places the savings in an investment account. The results may surprise you.

In this scenario, at an annual rate of eight percent, the savings grows to almost $4200 in twenty years. Allowing for additional time also increases the savings. With the annual rate of return fixed at eight percent for thirty years, saving ninety-one dollars and twenty five cents at the end of every year would give the investor more than $10,000 in addition to his/her other savings. Sacrifice a piece of bubblegum today for a healthy retirement later.

Second, understand the relationship between supply and demand.

High supply generally translates to low prices and high demand generally translates to high prices. Our market place, no matter the service or product, eventually subscribes to the laws of supply and demand. Keep this principle in mind when you invest.

Third, consider tax deferred accounts for long term objectives. Tax deferred accounts can have a huge impact on the accumulation of wealth.

The fourth aspect to exercise is a cousin to the third. Capital gains may translate to capital pains.

Capital gains are taxed differently depending on whether your investment is considered a long term or a short term investment. For tax purposes, remember long term capital gains receive preferential tax rates over short term capital gains. Your tax advisor should be able to provide expansive information on this topic.

Number five on our list of six pack tabs requires an acceptance of proper nutrition. An investor cannot expect a healthy portfolio without risk management and insurance fundamentals. All it takes is one catastrophic event to ruin decades of prudent savings.

Finally, our sixth component to a strong financial plan: every pencil needs an eraser.

Novice investors may view the stock exchange as an automation of easy wealth. Yet, the same investors neglect the outcomes of yesterday's fools and the haunts of agonized losses.

Across the market, intelligent men and women loiter, for they have touched wealth and it provided a drunken exuberance. They appear fatigued and victimized, but retain enough composure to invest another day.

Learn from their exhausted efforts. Accept challenges but not failures. Just as one unprofitable decision does not detour the diligent investor from long term goals, one profitable decision does not bolster false security.

To expand on the topics of six pack tabs, or for more specific information, be sure to visit with your advisor.
About the Author
Wardlaw assists financial planners/advisors, brokerage firms, periodicals, and other investment information syndicates create informative and entertaining articles. For comments and questions, please contact the author at http://www.tools2invest.com.
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