When the economy enters a recession and we see people losing their jobs—especially when job loss numbers are in the millions—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?
The stability and security of your job should be a factor in your decision making as you allocate your investments.
[VIDEO] Is Your Job Like a Stock or a Bond
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.
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.
Image courtesy sylvar.