Tuesday, March 13, 2007

Investment and Taxi Analogy

Investment for retirement is like taking a taxi from Point A to Point B.
What are their similarities?

1) The money you have today is your point A. What you need for retirement is your point B.
2) The journey from A to B = Your current age to your Retirement age
3) To reach B faster, taxi driver have to drive faster. Faster Taxi = more risk.
If you want to retire early, you have to invest more agressively. It involve more risk too.
4) If the driver is experienced, the car is proven to be reliable and have many safety features, you might be willing to take more risk and travel faster.
Similarly, if you have an experience Adviser, the investment funds have good track records and are properly diversified, will you be willing to take higher risk too?

Either way, you will reach your destination. Its a matter of when you can achieve it. You want to retire at age 55, 60 or 65? Retire at 55? You need to take higher risk. if you want to wait till 65, take less risk. As simple as that...

Risk = Potential Rewards

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