The theoretical model of household asset allocation can be traced back to the life cycle-based portfolio theory proposed by Merton and Samuelson. After that, the representative model is Grossman and Laroque’s infinite-life-cycle asset allocation model that incorporates housing into the household asset allocation model. But with the development of the times, a more scientific way of asset allocation has emerged.
The family asset quadrant chart is a recently popular scientific asset allocation approach. It aims to achieve a virtuous cycle of family asset allocation by diversifying risks through a reasonable asset allocation.
If the disposable assets are zero or even negative, the first thing you need to do is to increase your income and reduce your expenses so that you can have a surplus of disposable assets before considering the asset allocation. If you can’t specify your disposable assets, you can use some bookkeeping apps on the market to help organize them, so I won’t go into details here.
The household asset quadrant chart divides household assets into four categories based on the use of funds: daily accounts, security accounts, investment accounts and stable accounts, with the four asset categories accounting for 10%, 20%, 30% and 40% respectively.
1. Daily accounts. The basic function of this account is to meet the family’s monthly expenses for daily life, food, clothing, housing and transportation, so it stores flexible assets that can be taken out at any time. In addition to regular daily expenses, it is also necessary to prepare a part of emergency backup funds to maintain the normal life of the family, such as coping with unemployment. Therefore, it is recommended to allocate 10% of the daily account allocation, and retain enough working capital to support 3–6 months of living expenses. The daily account is the money can be used at any time, which requires high liquidity and security. It is generally suitable for flexible deposits in banks. Although the earnings are very low, it is safe and easy to access.
2. Security Account. The purpose of this account is to earmark money for unexpected and large family expenses, and to protect large amounts of money with less leverage. The protection account can be used to help the family in critical situations, such as a serious illness, car accident, etc., and can help the family to overcome difficulties and enhance the family’s resilience to risk. It is recommended to allocate 20% of the protection account, and you can consider protection commercial insurance, such as accident and medical treatment. Avoid family members falling into poverty due to illness or having no money for medical treatment.
3. Investment accounts. What this account does is create earnings for the family. Create high returns with relatively low-risk investments and create more wealth for your family. The key to this account is that no matter whether the profit or loss will have a fatal blow to the family assets, it is recommended to allocate 30% of the investment account, and high-return investment products such as stocks and cryptocurrency contracts can be considered.
4. stable account. The role of this account is to prepare assets in advance for the future. Such as pension, children’s education and so on. Principal security, stable earnings, and compound interest appreciation are the characteristics of a stable account. Investing in a stable account is all about long-term financial planning. It is recommended to configure 40%, and you can consider products such as earnings, high-risk and low-risk cryptocurrency fixed savings.
It can be seen from the four account settings in the quadrant chart that the allocation of household assets needs to consider three key points: liquidity, security and earnings. However, it is impossible for any traditional financial product to have the above three characteristics at the same time. However, just as the household asset allocation model is constantly iterating with the development of the times, traditional financial products are also constantly being updated with the development of technology.
In recent years, with the emergence and development of blockchain, more and more investment institutions have begun to be optimistic about its openness, security, and immutability, which can give financial products more protection. The cryptocurrency savings based on blockchain technology is also lower than the bank savings because of the investment threshold and handling fee, but the earnings are higher than the bank savings, so it has also become a popular investment product of many investment institutions.
AAX Exchange is a legal exchange with a Singapore MAS financial license, and it is also the first cryptocurrency exchange in the world to adopt the Millennium matching engine technology of the London Stock Exchange Group. Since its establishment in 2018, it has been in stable operation for more than four years and has more than 2 million registered users worldwide.
AAX exchange has become the most popular crypto platform in the Indonesian market with its savings product, Savings, which has an annual interest rate of up to 20%. Savings allows users to deposit cryptocurrencies in flexible or fixed ways to obtain stable earnings that are much higher than banks. flexible supports deposit and withdrawal at any time, and users can withdraw at any time after the fixed expires. New savings users also have multiple savings hike coupons of up to 60%. AAX exchange will launch special savings activities from time to time. Users can get rich cash or cumulative hike coupons rewards.
All cryptocurrencies and earnings in AAX can be withdrawn or exchanged back to fiat currency 7*24 hours without any problems. Indonesian users can exchange the Indonesian rupiah back to the bank card at any time through the third-party electronic payment platform AWE supported by the system.
Household asset allocation itself is very complex, involving variables such as income, spending, borrowing, family structure, and more. In addition to the daily account and guaranteed account investment models that cannot be selected, whether it is the most important stable account or the second most important investment account, adjustments need to be made according to the actual situation of each family. The emerging cryptocurrency savings investment Provides more earnings and configuration possibilities for household assets. As long as classification management is done well, asset allocation can be done slowly, which is worth learning and learning from all families.