What does a festive delicacy like fruitcake have in common with investing? More than you might think, according to RBC Direct Investing.
It’s your choice of ingredients that makes the mix especially your own – in your cake batter and in your investment portfolio. And just like one person’s perfect fruitcake may be soaked with brandy and another’s studded with nuts, an ideal portfolio balance will be different for everyone.
First, a bit about the fruitcake tradition. In medieval England, Christmas (plum) pudding originated as a boiled concoction that contained raisins, other dried fruit, eggs, suet, treacle or molasses, and sweet spices like cinnamon and ginger.
Not much later, a surplus of sugar led to the practice of candying fruit to preserve it, and soon glacé fruit become the rage in British fruitcake. And that practice of dousing fruitcake with a good glug of brandy, rum or whisky became another way to keep cakes fresh for longer.
Your portfolio can benefit from inherited wisdom, too. For example, maximizing yields while minimizing risks is a truth your grandmother might have passed down with her recipes, although exactly how to get there can be less obvious. Tradition might suggest a mix of fixed-income investments, stocks and cash, but how that aligns with your individual goals or aversion to risk is up to you.
Consider your own needs just as you would your taste in desserts. If you’re a young investor, perhaps you’re more comfortable with taking on added risk with the hope of greater rewards and extra time to make up for downturns. More mature investors who are closer to retirement may well prefer to take on less risk, opting instead to make safety a bigger priority.
No matter your risk tolerance, exploring your options can be a great learning opportunity. Bake that cake, balance your portfolio and enjoy the holidays.
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