There are many jobs in stable well-established industries like multinational oil company and in professions like medicine, civil service or law which produce a consistent employment income. To an investor, this would resemble buying into a long-term government bond and enjoying a regular return on that investment.
Then there are companies which pay very handsome salaries, but the employment prospects are far less certain, and a high-flying career can suddenly be derailed by a change of bosses. The sudden swings in their fortunes are similar to the more adventurous investors who pile into the stocks of young, high-growth companies only to find that their stocks follow the roller-coaster ride of the stock market, giving them sleepless nights.
It is useful to use stock market analogy to describe the risks and rewards which a person may be getting from his job. That is because, depending on the type of job which a person holds, this should have a bearing on the type of investment strategy which he should adopt. For instance, those with a "stock-like" career might want to own more bonds if only to get a source of stable passive income to offset the risks they may be encountering in their jobs. Similarly, those with "bond-like" careers can afford to take more risks like having an investment portfolio which has more stocks.
However, what is interesting to note in real-life situations is that those who have higher level of risk tolerance also tend to choose more "stock-like"careers and adopt riskier investment strategies, while people with "bond-like" jobs are also more conservative in their investments.
So one question which an individual should ask himself as he assesses his assessment strategy is how aggressive he is, career-wise. For example, if he is an entrepreneur, he should be holding more cash and investments offering passive income such as bonds to offset the risks he may be taking in his business.
Given the uncertainties of the job environment, a person's earning potential may change, sometimes dramatically, as he encounters major changes good and bad in his career such as getting a big promotion or getting demoted or even fired. And in making efforts to mitigate the risks from the uncertainties of his job, he should diversify his personal wealth balance sheet to ensure there is enough set aside to tide him over any unexpected crisis.
Then there are companies which pay very handsome salaries, but the employment prospects are far less certain, and a high-flying career can suddenly be derailed by a change of bosses. The sudden swings in their fortunes are similar to the more adventurous investors who pile into the stocks of young, high-growth companies only to find that their stocks follow the roller-coaster ride of the stock market, giving them sleepless nights.
It is useful to use stock market analogy to describe the risks and rewards which a person may be getting from his job. That is because, depending on the type of job which a person holds, this should have a bearing on the type of investment strategy which he should adopt. For instance, those with a "stock-like" career might want to own more bonds if only to get a source of stable passive income to offset the risks they may be encountering in their jobs. Similarly, those with "bond-like" careers can afford to take more risks like having an investment portfolio which has more stocks.
However, what is interesting to note in real-life situations is that those who have higher level of risk tolerance also tend to choose more "stock-like"careers and adopt riskier investment strategies, while people with "bond-like" jobs are also more conservative in their investments.
So one question which an individual should ask himself as he assesses his assessment strategy is how aggressive he is, career-wise. For example, if he is an entrepreneur, he should be holding more cash and investments offering passive income such as bonds to offset the risks he may be taking in his business.
Given the uncertainties of the job environment, a person's earning potential may change, sometimes dramatically, as he encounters major changes good and bad in his career such as getting a big promotion or getting demoted or even fired. And in making efforts to mitigate the risks from the uncertainties of his job, he should diversify his personal wealth balance sheet to ensure there is enough set aside to tide him over any unexpected crisis.
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