Jun 21, 2020

Cory Diary : Asset Investment hierarchy of needs

Maslow's hierarchy of needs is a theory in psychology proposed by Abraham Maslow in his 1943 paper "A Theory of Human Motivation" in Psychological Review. 

Broadly a sample I got as follow,

Maslow's hierarchy

Similarly for Investment, there are a lot of psychology involves in how we manage Greed and Fears. This can be classify by level of risks individuals willing to take but with the the ratio (equivalent to assets) adjusted as one progress on asset levels below.

This is depicts from Left to Right as one net-worth increases. A simplified model. In reality, asset between classes may have situation could not flow freely such as if one introduces Pensions or CPF layer which could limits.

The logic that we fulfilled the basic minimum on cash holding which could increase with changing circumstances but nevertheless small in area in the triangle but the absolute figures likely larger. Follow by different level of investment risks.

One key point to look at is the SSB where the area on left is larger with just 100k investment whereas the right triangle the SSB is much smaller but has 200K allocated. This is primarily due to much larger asset base as one progress in life.

The dividend investment increased significantly in area and absolute as well as one build up dividend investing with potentially  taking into consideration of diversification.

The Property can be home or investment property. Some would feel this should be at lower level.  I would agreed if is home to be one of bottom but property usually comes later especially when the government do a good job of providing to the masses when we are much younger than our oversea cohorts. 

As one's career develop and salary increase, and existing home get paid down, chances are we could afford an investment property. Then the peak is more off investment purposes. In some society, renting is common, and not necessarily a need to own one.

The main essence is if one meets the basics, psychologically we are much more prepared for investment dynamics and ride better between bulls and bears while highly vested in market or making investment decision.



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