PRESENTATION ON : INVESTOR LIFE CYCLE Presented by: Vinay Kenkere
MEANING Investor:An investor is a party that makes an investment into one or more categories of assets --- equity, debt securities, real estate, currency, commodity, derivatives such as put and call optionswith the objective of making a profit.Someone who provides a business with capital and someone who buys a stock are both investors. Since those in the secondary market are considered investor.Speculators are also investors.
MEANING Investment: any vehicle into which funds can be placed with the expectation that it will generate positive income and/or that its value will be preserved or increased.Return: Current income(Dividends /Interest) Increase in value(Capital Appreciation)
MEANING Investor Life Cycle:Investors life cycles contains different stages, which shows the different phases of individual investor in his/her investment life, It also include both short term and long term investments
PHASES IN INVESTOR LIFE CYCLE ILC Early Carrier Mid Carrier Retirement Late Carrier
EARLY-CARRIER At the begging of his/her carrier Individual’s net-worth is very small/negative Spending exceeds his/her income Individuals expect larger future income Individuals are willing to take higher risk in anticipations of high returns.
MID-CARRIER Individuals are covered with insurance by this time. Having tangible assets(home) reasonable base of financial assets. Individuals are willing take high risk for future high returns. Preservation of capital acquires some importance
LATE-CARRIER Individual has virtually no debt or mortgage on his income. His/her savings level is high. Risk exposure is reduced.
RETIREMENT Investments become principal source of income in this step. Chances of unexpected expenditures (Medical expenses) Preservation of capital may become the over-riding concern.
RISK-RETURN PREFERENCES OVER INVESTORLIFE CYCLE Return Risk
PHASES IN INVESTOR LIFE CYCLE ILC Accumulation Phase Consolidation Gifting Spending Phase Phase Phase
ACCUMULATION PHASE Early to middle years of careers Attempting to satisfy intermediate and long-term goals Net worth is usually small, debt may be heavy Long-term investment horizon means usually willing to take moderately high risks in order to make above-average returns
CONSOLIDATION PHASE Past career midpoint Have paid off much of their accumulated debt Earnings now exceed living expenses, so the balance can be invested Time horizon is still long-term, so moderately high risk investments are still attractive
SPENDING PHASE Usually begins at retirement Saving before, prudent spending now Living expenses covered by Social Security and retirement plans Changing emphasis toward preservation of capital, but still want investment values to keep pace with inflation
GIFTING PHASE Can be concurrent with spending phase If resources allow, individuals can now use excess assets to provide gifts to other individuals or organizations Estate planning becomes important, especially tax considerations
PHASES IN INVESTOR LIFE CYCLE ILC Middle-Aged Youth Stage Consolidation Retiremen Stage t Stage
YOUTH STAGE Twenties and thirties Growth-oriented investments Higher potential growth; higher potential risk Stress capital gains over current income Whatare some examples of age- appropriate investments? Common stocks, options or futures
MIDDLE-AGED CONSOLIDATION STAGE Ages 45 to 60 Family demands & responsibilities become important (education expenses, retirement savings) Move toward less risky investments to preserve capital Transition to higher-quality securities with lower risk Whatare some examples of age- appropriate investments? Low-risk growth and income stocks, preferred stocks, convertible stocks, high-grade bonds
RETIREMENT STAGE Ages 60 and older Preservation of capital becomes primary goal Highly conservative investment portfolio Current income needed to supplement retirement income Whatare some examples of age- appropriate investments? Low-risk income stocks, government bonds, quality corporate bonds, bank certificates of deposit