How your Investment strategies Evolves with your Age

by Mike on May 5, 2014

How your Investment strategies Evolves with your Age

Managing our finances is going to be a lifelong process and this applies especially to how you invest. It doesn’t stop when you pay off all your debts or when you reach your retirement age.  This is also true when it comes to investment.  What will usually change as the years pass by are your strategies and your attitudes towards making financial investments. Have you considered how your your investment strategies evolves with your age?

 

How does your age affect your investment strategies?

Age they say comes with wisdom and it isn’t unusual for investors to start showing notable transformations on how they handle their business portfolio or the level of risk they want to take.  Studies show that specific age groups would have specific factors they would prioritize when it comes to assessing what to them is a good investment option.  This is evident when a financial advisory organization did a poll on its clients.  Based on the results on how various generations decide on investments, those who belong to the Baby Boomers, age 50-60, are more concerned about the risk of their investment compared to those who belong to the Generation X who are ages 30-40.  The latter would rather prioritize portfolio diversity on the other hand.

Truth is, investment evolves with your life and is greatly affected by some major changes that happen in your life.  Some of these influences include:

Goals

As you age your goals change.  What you wanted when you first got your job is entirely different to when you are already approaching retirement.  What you desire to have when you are still single is not the same when you have your own family.  With these goal changes come changes to how you manage your finances and also on what kind of investment you want to have.

Levels of Risks

How your Investment strategies Evolves with your AgeBased on the investment horizon of the investor, the level of risk that you go for canl be affected.  Those with longer time in their hands will have the confidence to capitalize in investments that might have the potential to go up but also have high possibility of its value going down.  They can consider both scenarios and still go for it because they know they have time to bounce back if things will go down.

This is something that people approaching retirement can’t opt for.   High-risk investments even with a potential of high returns will put their financial state on the line if the market starts to change drastically away from what they expected.  They will have a hard time making up for the losses or even time to create another strategy.

Time you Expect Returns

When you are young or just starting your career, you have ample of time to reach your goals.  That means the younger you are, the more options you have and the longer your investment horizon is.  You can even try out alternative investment options or even test various risky to increase your future profits including starting or buying a business.  For those who are in their prime, their investment horizon is much shorter which means they will go after investments where they can get returns faster but are still safe bets to their way of thinking.

So where are you in life?

Your investment strategy and what you feel is your risk versus reward can in the long run create a big impact on your financial journey. Whether you are just starting to explore a strategy or you are using something tried and true for the near future, you have to consider factors like your age, goals, investment horizon and the level of risks that you can still manage to take.  Understanding all these will help you with your strategy and possibly give you a better chance to maximize those profits.

 

What investment strategy are you relying on? Know something you can recommend? Leave us a comment and dont forget to share for all your other investor friends!

 

***Photos thanks to Steven Campbell and Luz of Flickr***

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