How to Invest According to your Age

stride-how-to-invest-according-to-your-age-featuredAll of us dream of retiring in style, whether it is ten, twenty, thirty or forty years from now.

You might want to spend your golden years relaxing, exploring or travelling. Walking on the Great Wall of China, taking a cruise through the Nordic Fjords, extended holidays with friends and family can all become part of your retirement - if you invest correctly, according to your age.

The perfect strategy for a 25-year-old is not the optimal strategy for someone in their forties. So let’s take a look at the best age-appropriate investment strategies by the decade.

Getting to grips: How to invest in your 20’s

The habits you adapt in this century are the ones that will most likely stick with you for the rest of your life. So you better start implementing strong financial habits before it’s too late. Begin by tracking your expenditures. It will provide a clear indication of where you can cut costs and save more.

Saving should be a priority. I know it’s difficult with a student loan breathing down your neck but consider your savings as yet another expense and make provision for it in your budget. In doing so, you will be saving money on a monthly basis and gradually learning to live within your means.

When you have come to grips with saving, you should start investing whether it is in a company 401(k), an IRA you set up yourself or in the stock market.

It is vital that you start investing as soon as possible. In your twenties you have the biggest advantage of all – time. It is an invaluable assets, due to the effect of compounding interest over the long-term. What you invest in this decade holds the greatest growth potential.

While you are still young, and you have time on your side, you can easily absorb market changes and withstand a higher level of risk for higher rewards. Focus on growing your limited monetary resources and look to invest aggressively in stock rather than bonds.

Career-focused: How to invest in your 30’s

In your thirties? Carpe Diem! It is time for you to live your life by this aphorism. You have gained enough work experience and, therefore, need to leverage your hard-earned skills into a bigger pay cheque.

Earning higher figures should directly translate into saving and investing larger amounts of money. You are still young enough to reap the rewards of compound interest, but old enough to be investing 10-15% of your income. Understandably, setting up a house and starting a family can be expensive, but contributing to your retirement should still be a top priority. With a good 30-40 active working years left, you need to up your game by maximising that contribution.

Retirement-minded: How to invest in your 40’s

If you have played your cards right, you should be making the most money you have ever made.

If investing earlier in life wasn’t a feasible option, but you are now capable to do so, you need to buckle down and get serious. You have missed out on the golden years of compounding interest, but it is not too late to prepare for your retirement. Fortunately, you are at the midpoint of your career and probably reaching your peak earning potential. With the added injection of income, you can still catch up if you are careful. You don’t have enough time to mess around, so you better be well prepared and on top of your game.

Winding down: How to invest in your 50’s and 60’s

You have reached the final chapter, but now isn’t the time to lose focus. If you were aggressively investing in stocks in your younger years, now is the time to be more conservative. With retirement on the horizon, your risk tolerance is much lower than your 25 year old self. You should adjust your asset allocation strategy to preserve the wealth you have built up in your active years. It would be wise to switch to more secure and stable investments, the likes of bonds, money markets or even minimising trading activity to avoid unnecessary risk.

You should not cash out your portfolio, but instead, weight it differently. You still have a long life ahead of you, hold on to income-producing assets. We suggest periodically withdrawing the interest and dividends from your portfolio to live on, while letting your portfolio grow. It has been established by investment studies that withdrawing 4% is the best practice to avoid draining your portfolio.

In conclusion

As the Chinese proverb says: “The best time to plant a tree was 20 years ago. The second best time is now.” This attitude pertains greatly to investing.

If you haven't started investing yet, then today is the best day to do so. Don’t allow fear or doubt to hold you back. As long as you invest according to your age, you will be retiring in comfort. And for those already investing, remember your investment approach should age with you.

If you are interested in learning more about investing in the stock market, I recommend visiting our library here


Topics: Portfolio Management


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