Investing in Equities: The First Steps

Establish your investment plan

Before you start to build your portfolio, you should first clearly determine your investment objectives. Some of the key issues that you need to consider include your investment time frame, your appetite for risk, your requirement for income versus capital growth and the tax implications of your transactions.
Know your time horizon

Determining your time horizon for investment is critical to your asset selection, as the performance of the various asset classes can differ markedly depending on the time frame involved.
Younger investors should favour equities

To ascertain your appropriate asset structure, you may wish to consider what position you are at in the life cycle of investment. If you are in your early years, much of your income may be required to meet the expense of mortgage payments and the likely costs associated with a young family. However, it is wise to use any surplus resources you may have to lay the foundations for your long-term future. You should be able to withstand greater volatility in the knowledge that equities will outperform other options over the longer term. Consequently, your portfolio should be heavily weighted towards equities (See Graph 1a).
Middle-aged investors should continue to favour equities

As you approach the middle stages of life, your income will probably be nearing its peak, while at the same time expenses should be declining. This is a combination of circumstances that should allow you to invest more heavily. However, keeping in mind that retirement is inevitable, your investment approach should be more conservative since at this stage in life it is important to protect your capital. Thus, your portfolio is likely to contain a balance of equities, bonds and cash (see Graph 1b).
Older investors may require capital growth and income

As retirement approaches, capital growth should remain important, especially given the trend towards early retirement and increasing longevity. Yet, as the provision of a secure income assumes greater priority, your holdings of bonds may increase (see Graph 1c).
No rigid solutions

It is important to bear in mind that the above illustrations are merely indicative. Although age-based generalisations are a useful starting point, they do not provide definitive solutions to the investment challenge which will vary from person to person. For example, many people that are approaching retirement have their income needs fully satisfied by their pension. Therefore they are still keen to favour capital growth rather than income generation from their investments. As people's lives evolve, flexibility is clearly required to accommodate competing priorities and changes in circumstances.



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Steps in Investing in Equities

Feline that is a very interesting article. I have searched the web over for more information regarding equities. Somehow I had missed the website in which you linked. Much Appreciated!

This information is rather obvious, but it is still something that many people often forget. You should regularly adjust and analyze your portfolio as you age.