3G technology is a standard for mobile phones to help the user connect with the world in real time. Mobile phones and services advertised as 3G are required to meet certain technical conditions, including reliability and data speed transfer. This way, the user stays up-to-date and informed.
Staying connected to the economic world, receiving real-time market updates, and being able to contact your broker to give trade orders can all be made easier with 3G technology. However, when it comes to investment portfolio strategy and design, I like to refer to 3G technology as, “Getting, Growing, Giving.”
This refers to the stage of life when you’re actively increasing your net worth. Hopefully, every month you get a salary and put some of it aside for savings. Make sure your savings is fixed, and you don’t forget a month. This is a crucial, since you need money to make money. You can’t earn interest or dividends if you don’t invest.
This refers to the stage where you have a nest egg. Create an investment strategy and hopefully your portfolio value will steadily grow. When devising an asset allocation model, keep in mind your tolerance for risk and a time frame. The goal is to have your investment portfolio provide for your retirement needs.
This refers to the post-retirement portion of your life, when your portfolio gives you the income you need in order to live the lifestyle you want. Giving also refers to gifting. Often, people design their portfolio to enable them to give sizeable gifts, either to their children or to a charitable cause.
What about 4G?
Since technology is constantly evolving, there are those who hold that 3G is passé, and use 4G technology, saying it’s faster and can transmit even more data. In a world that is filled with fast moving data, it’s crucial to know what you want and where you’re going. Therefore, the 4th G of investing is your GPS, a device that makes sure you are on track to reach your destination. Careful investors makebenchmarks to measure where they are in relation to where they want to be. Just as a GPS announces “route recalculation” after taking a wrong turn, you need to make sure that your financial plan is flexible enough to point you in the correct direction after the market takes a potentially wrong turn.
Getting, growing, giving, and using a GPS are the “technologies” that you should use in creating your financial portfolio. If you need help getting from one step to the next, consult with a qualified financial planner.
Douglas Goldstein, CFP®, is the Director of Profile Investment Service, Ltd., which specializes in helping people who live in Israel with their US dollar assets and American investment and retirement accounts. He helps olim meet their financial goals through asset allocation, financial planning, and using money managers.
Published September 2, 2012.