There are several constraints that may work against your desire to build up a healthy nest egg. These are all challenges of having money. Unfortunately, many of them are unavoidable? but that doesn't mean that they're not manageable. The best thing to do is know that they exist and develop strategies to help you over come them.



The constraints you'll face by having an investment portfolio (and by not having one!) include:

Risk/Return. This relationship is the most important consideration? that's why we've been talking about it so much. How much risk are you willing to accept to get a certain return?

Time horizon. When do you want to have your goals accomplished? If you are retiring next week and you're investing your first dollar today? you've got a very short time horizon. If you're just entering the workforce and want to save for retirement, you've got some time ahead of you. These factors serve to identify your investment's risk level.

Liquidity. Liquidity in a portfolio is cash or the ability to convert something to cash almost immediately. Typically, cash or short-term CDs (less than a year) are considered liquid. You have to make such a consideration. When building a portfolio, you'll want to maintain some liquid assets in order to act on opportunities as they arise, or to draw from when you need it.

Taxation. While taxation is not a primary issue in portfolio management, it is an issue that you'll want to consider when you make investing decisions.

Legal requirements. Your portfolio needs to take into consideration any legal requirements. If, for example, you own a certain percentage of stock, or you are the director of a company and plan to trade your company's stock in your portfolio, you'll need to carefully weigh each decision in light of the Security Exchange Commission's regulations. Your broker, lawyer, and accountant should play a part in this decision-making process.

Emotional factors. More than just knowing your dreams and goals, though, you also need to know what lets you sleep at night. You need to determine what level of risk you're willing to accept in order to see your rewards fulfilled in your lifetime. But it is important to balance that with your ability so that you can sleep with peace at night. Your investment should ideally deliver you the quality-of-life, satisfaction and peace-of-mind. We call it, "sleep insurance."

Don't forget: investing for tomorrow is also investing for today. That means that you're putting money away for tomorrow but if it has a negative impact on today, it's not worth it. Losing sleep over the high risk investments is one example. Another example might be passionately pursing your goal of investing so aggressively that you cannot afford today's bills.

May the Windfall be with You !!