In my opinion I think it has to do with asset allocation. I can illustrate this using 3 baskets.


This is where you can call on when other investments have failed e.g when the business is down or you have lost your job or you are disabled or loss of life if you are a bread winner.

In this basket you get low returns on your investment but it is guaranteed.  These investments include

Money market fund ( highly recommended for emergency fund. Its recommended that 6 months equivalent of your monthly expenses should be emergency fund so that in the event of loss of Job or business you can continue the same lifestyle for atleast 6 months)

Insurance policies ( this includes education policies, disability covers, whole life covers etc)

Your own home

Buying a property

Fixed deposits just to mention a few

30 to 40% of your investments should be in security basket, not everything.

Insurance 4


In this you expect high returns but its also highly risky. E.g

buying shares,  buy or start a business, equity funds etc


In this you buy your dreams, they may not necessarily give any financial returns but it gives psycological satisfaction.

E.g A nice holiday to your dream desstination

Sleek cars and gadgets etc

All the three baskets are important but allocation is the real issue.

Most young people will start by filling the dream basket and then the growth basket because they want to get rich very fast, in the event they lose their jobs it means starting all over again. I think you dont have to start all over again, if you can fill your security basket, then you can have a fall back.

Its recommended that the older you get the more of the security basket you need to fill because you have no luxury of age to recover from your mistakes.

Again how much you allocate for each basket depends on you risk appetite.


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