Monique Todd
Contributor

Every day we go through the rigours of life. We try to compensate for a stressful day with simple pleasures, watching television, taking long walks, or just chatting and unwinding with family and friends. Why do we have a need to do this?

The easy answer is that we need balance in our lives. Wherever possible, we need to counteract stress with relaxation, seriousness with playfulness and sadness with happiness.

Although most people achieve balance in their lives, however, their investment portfolios are unfortunately skewed towards investments that may not be best suited for their financial needs and goals. So, the question must be asked.

Do I have the right investment balance for my portfolio?

Creating a balanced portfolio involves the proper management of the risk you take on and the return that you receive from your investments. For instance, the older you get, try and avoid risky investment products. Instead, seek to diversify your investment portfolio by placing your money in a variety of products which offer steady returns. This will ensure that you are adequately covered in case the more risky products do not provide the return that you had been expecting.

Investment cycle
To use a simple illustration, use your life span as your investment cycle. The beginning of your cycle should be in your early professional life, when it is advised that a significant portion of your money can be put in instruments such as stocks which usually carry higher returns.

Do not shy away from diversifying into these investments which are termed risky. You can make the investments through local investment institutions. These companies make it easy for you to manage your portfolio without the usual headaches.

A good example is a unit trust that will spread (and manage) your money for you among various investment options. If you are up for the challenge, feel free to spread your funds in stocks from different industries (eg manufacturing and banking) to further diversify your portfolio.

As you advance in age along your investment cycle, your needs and goals will change. With increasing responsibilities, most likely you will want to concentrate on generating additional income.

With retirement on the horizon, you should now focus on placing your funds into more secure (less risky) investment products. Examples of these include fixed income investments, such as bonds, or high dividend yielding stocks. While you cannot completely avoid risk, the risk associated with bonds is considered lower than the risk involved in investing in the stock market. An added bonus is that bonds provide a regular source of income.

You can also further diversify your portfolio by investing in bonds from other regions of the world. Again, don't feel intimidated. Your investment advisor will also wade through the seeming confusion to come up with a combination that is right for you.

The sunset
Finally, as you move into the sunset of your life, your desires will not only turn to simple everyday financial survival (without the monthly pay cheque), but also to live and indulge a little.

Whether you are interested in simply getting pleasure from tending your garden, or if you would like to travel to that country you have always wanted to visit, your primary focus should be fully on generating income from your investments.

After all, without that sure sum of money coming from an employer every month, an income alternative is a must. In this phase of your cycle, the percentage of risky products in your portfolio should be minimum. All your investments should provide you with regular income. A retiree pays less attention to the growth in the value of his investment portfolio than he or she pays on simply its preservation to help sustain a living.

So, as you sit back and start to plan what your financial goals are, look at where you are at in your investment cycle. Wherever you are, balance is important and your investment portfolio must contain the balance that suits your goals and needs. Do not be discouraged if you are closer to the sunset than you are to the sunrise. The great thing is that it's never too late to start investing, and one day spent procrastinating is potential money lost that you could be otherwise earning. Let's get started!

The author is senior marketing manager, Scotia DBG
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