Create a separate bank account where you can keep 20% of your monthly take home pay for savings and investment. Come up with a 6-month emergency fund (let’s say 100K), any amount after that should be transferred to another investment vehicle, which can yield higher than bank’s interest rate. Depending on your appetite, you can invest in time deposits, mutual funds, t-bills, treasury bills, or stocks.
My simple formula
- save 6-month emergency fund; any amount in excess..
- invest in mutual funds
- invest in stocks
- invest in employee stock options
since my appetite is still aggressive. With my limited funds, I’d like maximum growth with the least possible time
as you grow your investment portfolio, you become more conservative, since you’ll now shift from wealth accumulation to wealth protection. That’s why most people still prefer bonds from banks than gambling in the stock market, especially if you have so much at stake.
*Emergency Fund – amount you keep if in case you lose your job… this amount should temporarily provide for your obligations and needs while you’re in the process of looking for another job… there is no standard amount pegged as an emergency fund—it depends on your lifestyle and existing obligations (i.e. car or house amortization).
This will fund your needs should something happen, such as a job loss or illness. This should be at least six months’ worth of your regular expenses. Put this money in an easily accessible account, such as a time deposit or mutual fund or unit investment trust fund. Don’t touch this fund to meet other needs, such as down payment for a car. That should be financed by separate savings.
