Investment guidance should not be dependent on your job completely, but the job might influence it greatly. Although any profession can offer useful information and benefits for the investor, the advice that should be used for the person’s situation should be based on many other factors, besides the person’s profession.
First, job security and the ability to match income to the needs of the household are essential. Investment risk varies from one client to another depending on the stability of their income levels; a stable worker with a fixed salary can take the investment risk that an employee with volatile income cannot based on the stability of the job salary. For example, a tenured college lecturer might be comfortable exposing their income to the risk of stocks, while a freelance artist might be more comfortable exposing his income to the risks of a bond investment.
Second, having some background on the industry can be useful. Some investors choose to work in a given sector because they feel they have information that is vital in guiding the investments. An IT individual may be wise to exercise caution and invest in emerging technology companies with the belief that he or she knows what he or she is investing in. Nonetheless, such over-concentration and focusing on a particular sector increases the risk if the sector experiences a downfall.
The investment strategy of the job should also depend on the benefits that come with the job – your benefits. Whenever an employer provides 401(k) match it is highly advisable to make use of the offer in its full capacity. Consequently, stock options should be considered when planning for mutual funds to mitigate concentration by your company’s stock.
However, using the money gotten from the job as the only tool for decision-making may mean having biased and poor diversified investment decisions. There are specific goals that each individual has for their money and individuals’ risk-taking ability and the time of return should not be overlooked in the investment process. Those who pay attention to all these factors in selecting a portfolio are more likely to reap rewards, over a long period of time.
Thus, while there are some aspects of your job that will be useful in deciding your investment strategy, it is not the only thing you should focus on. That factors such as the jobs you do and the financial goals that you have will help you in managing your finances differently from when they are collectively diversified with the incentive.