Tuesday 1 November 2011

Basic Decision Flowchart for a DIY Income Investor

As a quick introduction to the DIY Income Investor approach I have put together a basic flowchart that (I hope) summarises the key decision points and options. The chart also shows the links to the Income Pyramid 'Levels' - which are in effect different asset classes, in (approximate) increasing order of risk.

 Here is the flowchart enlarged:

As I noted above, it is pretty simple; the key questions are:
  • do you have any spare cash?
  • (if so) are you in debt (including mortgage)?
  • (if not) do you have an emergency fund of 3 months-worth of savings to fall back on?
  • (if so) do you have experience of investing on the stock market?
  • (if so) are you risk adverse?

I think those 5 questions can broadly shape your investment choices using the DIY Income Investor approach - although it is clearly more complicated than that in real life. Perhaps some further - more detailed - flowcharts are needed?

I am not a financial advisor and the information provided does not constitute financial advice. You should always do your own research on top of what you learn here to ensure that it's right for your specific circumstances.

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