100 and Your Age

For those who would like a quick, albeit unscientific, way of arriving at a ballpark figure of how much to invest, try doing this -

100 - your age = % of your funds you should use to invest in higher yielding, but riskier, investments

For example.

Mr. Y is now 33 years old.

100 - 33 = 67%

If Mr. Y has 1 Million, we will suggest that he invests 670,000 in a higher yielding investment. Higher yielding may be stocks, mutual funds, UITFs, commodities (if that's even possible in the Philippines).

The rationale here is that as you grow older, you become more and more susceptible to risks. For example:

If Mr. X is 55 years old.

100 - 55 = 45%

As you grow older, less and less of your funds should be invested in riskier investments, and placed in safer investments like bonds, T-bills, time deposits (God forbid though).

However, there is a contrarian view to all of the above. For example, someone who is already 55 years old, but failed to save anything for his retirement a decade from when he turns 55, should he still invest in "safer" investments?

In the investment world, when you say "safer", it almost always means that this investment has subpar yields. When I say subpar, it means its yield is lower than the inflation rate. You won't want that happening especially since Mr. X would want to have more money by retirement age.

In the end, it will always be what the person needs and prioritizes. There is no hard and fast rule for a successful retirement. What is important though, is to start early. As the hackneyed phrase goes, The early bird catches the early worm.