Friday, October 20, 2006

Thumb rules for Investing

Recently I wrote that the thumb rule on the percentage amount of your investment in equity is 100 minus your age. But Flexo writes in his blog ( Consumerism Commentary ) that someone decided that with people living longer in retirement, that wasn't enough equity. So they changed 100 to 120. By this logic, 10-year olds should have 110% of their funds in stocks. I'd like to see a 10-year old who can pull that off.

Flexo has done a review on the Money Magazine's 25 rules to grow rich. Read the full story here.

Though there are many things which don't apply in the Indian scenario like the 401(K). However decide for yourself for these rules:
  • Spend no more than 2 1/2 times your income on a home. For a down payment, it's best to come up with at least 20%
  • Your total housing payments should not exceed 28% of your gross income. Total debt payments should come in under 36%.
  • It's worth refinancing your mortgage when you can cut your interest rate by at least one point.
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