By S. Wade Hansen, analyst at LearningMarkets.com
What is Your Risk of Becoming Unemployed?
When the economy enters a recession and we see people losing their jobs-especially when the job loss numbers look like they did in November 2008 when 533,000 people lost their jobs-we naturally take a step back and ask ourselves the question...How safe is my job?
Of course, there are many people who have already learned the tragic answer to that question, but if you are one of the lucky ones who hasn't been laid off, what are your chances that you will get laid off?
As you will see in the video, the stability and security of your job should be a factor in your decision making as you allocate your investments.
You Are Your Greatest Asset
When you are looking to allocate your investment assets between stocks and bonds, don't forget to take into account that your human capital is your greatest asset. Chances are, you will make much more money working during your lifetime than you ever will from your investment portfolio.
Because your income is the foundation of your financial portfolio, you need to include it when you are thinking about diversification. [To better understand diversification, check out my article and video on The Importance of Diversificaion.]
Is Your Job Like a Bond?
If your job is extremely stable and secure, you should view your job as a bond because bonds are typically much more secure than stocks. Since your job is more secure and you know you can count on your income coming in year after year after year, you can afford to be more aggressive in your investing by being overweight in stocks.
Is Your Job Like a Stock?
If your job is less than stable because you are in a volatile industry, are an entrepreneur and so on, you should view your job as a stock because stocks are typically much less secure than bonds. Since your job is less secure and you don't know if you can count on your income coming in year after year after year, you should be more conservative in your investing by being overweight in bonds.
Is Your Job Like a Stock or a Bond: Video Lesson
I've scratched the surface of this topic in the article above, but I go into more detail about what considerations you should be thinking about in your investment portfolio when you take your job security into account in the Is Your Job Like a Stock or a Bond Video. Click here to watch.
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