Interesting Investing Case Studies with Important Lessons

May 15, 2012: We found these interesting case studies related to investment portfolios of five families namely The Budds, The Zallas, The Ericksons, The Handel/Laports, and The Peters very informative. The article, "Fix Our Mix", was posted at CNN Money. From these case studies we can learn the following lessons:
  • Clearing debts is the first step towards savings.
  • Saving money for investments is just one part of the story. Educated investment strategies leading to a balanced portfolio, is really the core of building a healthy nest egg (in the long run).
  • To give up the all consuming human urge to time the market and make short-term profits. In other words, we should try to avoid having a portfolio of high volatility though it might appear very appealing in the short run.
  • Having too many funds may eat into the annual returns from the funds in the form of its numerous management fees which the investor has to foot.
  • To maximize our contributions in tax-benefit financial vehicles like 401(k)s, IRAs, etc. We should keep mutual funds or bonds whose returns are subject to high taxes, in these type of accounts, and try not to touch them till we retire. When we start drawing from the nest egg after retirement, we shall pay lower taxes since we will be in a lower income category than we were in our working lives.
  • We should track the investments to see how well it is doing to beat inflation and how much we are paying in its management costs.
  • Fine tuning the portfolio (as one ages) towards a more conservative ratio of stocks and bonds is extremely necessary to preserve the nest egg. With retirement at the door, we cannot afford to take too many volatile risks which might push us into debt and stretch the working life to well beyond the retirement age.
  • We need to evaluate financial advice carefully before we execute it with our hard earned monies, else we might be taken for a ride.
What are your view points about these case studies? Please leave your comments :).

1. Bigda, Carolyn: Fix Our Mix (CNN Money)

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