Diversification – the Manager & Senior Executive

In my previous post I looked at the personal cases of the Young Professional and that of the Rising Executive and how they can diversify their resources across different resource. In this post, I will consider the cases of the Manager and Senior Executive

Manager
Characteristics
Age: 40s
Annual Income: GHc 10,000 (Ghana) $70,000 (US)
Net Worth: GHc 55,000 (Ghana) $300,000 (US)
Risk tolerance: Low to Medium
Goals: Educate children and planning for retirement

Assert Allocation
Cash and cash equivalents………….……………………..10% to 15%
Fixed-income vehicles……………………………………….30% to 40%
Equities………………………………………………………..35% to 45%
Hard assets…………………………………………………...5% to 20%

Financial Profile
Your allocation is more conservative and liquid than that of the rising executive. Granted, you’re the same age. And your concerns are also very similar. But you don’t expect your future earnings to be nearly as great. And you would be much worse off if you lost part of your principal.
Your focus is also more on such critical goals as retirement and you children’s educations. You're less concerned with discretionary goals, such as a second home or a deluxe vacation. So you may need less of an inflation hedge. The reason: you expect inflation for basic goods and services to lag behind the inflation you anticipate in the cost of discretionary, or luxury, items

Investment Strategies
To increase liquidity and boost your income, you allocate more to fixed-income vehicles and less to hard assets. Reducing your investment in hard assets also reflects your lesser need for an inflation hedge

Senior Executive
Characteristics
Age: 50s
Annual Income: GHc 30,000 (Ghana) $150,000 (US)
Net Worth: GHc 150,000 (Ghana) $1 million (US)
Risk tolerance: Low to Medium
Goals: Make gifts to children, grand children and charities; and plan for a comfortable retirement
Assert Allocation
Cash and cash equivalents………………………………….0% to 5%
Fixed-income vehicles……………………………………….30% to 40%
Equities………………………………………………………..35% to 45%
Hard assets…………………………………………………..15% to 30%

Financial Profile
Your cash flow is now quite healthy. Your earnings have increased considerably, and your expenses have decreased, since the children have all finished their costly colleague educations. Besides, you have now both just about everything you want and need.
But you do want to plan gifts for your children and grandchildren. And you’d like to make a generous bequest to you alma mater.
Most important: you need to feel secure that your retirement years will be comfortable.

Investment Strategies
Since you didn’t need much ready cash, you transfer some of your funds from cash equivalents to fixed-income instruments. You get a higher return from longer-term fixed-income instruments than from cash and cash equivalents. You still have a way to go until your retire, so you keep your inflation hedges – the hard assets – constant. Right now, it doesn’t bother you that these assets are illiquid and yield little.

In my next post, I will be considering the case of the Retiree

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