Different investment opportunities for different age groups

Each investor has their own strategy, style and risk tolerance. Obviously no investment will be appropriate for everyone. Have you ever considered that certain investments may be more or less suitable for your portfolio depending on your age? Below is an overview to help you identify investment opportunities according to your stage in life.

Risk

When we talk about investments and consider the age factor, it all comes down to risk. We’ve all heard the old cliché that higher risk leads to higher rewards. On the other hand, it can also result in a higher loss. So when we define what types of investments are appropriate at each stage of the human life cycle, we do so within the framework of the level of risk involved.

Ages 18-35

Oh, to be young! Early life investors have a tremendous weapon against the risk downside: time. People in this age group can and should invest in speculative stocks and other high-risk (and possibly high-reward) investments. The reasoning is that if high-risk stocks result in losses, the investor has plenty of time to make up for that loss.

Ages 36 – 55

As an investor enters the middle age stage, they must begin to build a strong portfolio foundation. To do so, a widely recommended strategy is to start adding more growth-oriented stocks to your speculative investment mix. The ratio of growth stocks to risk stocks will largely depend on an individual’s comfort with risk, as well as their investment history and experience.

Ages 56 – 65

Late middle age naturally produces greater risk intolerance. This age group of investors should focus on growth and income investment opportunities rather than high-risk speculative stocks. The strategy here is to protect and grow a strong portfolio. Investors who have done well in the past and are comfortable with risk may still choose to participate in speculative opportunities, especially if they have keen instincts.

65 years and over

Investment opportunities that are most appropriate for this age group include income-driven stocks and safe investments that will earn interest on which the individual can live. Most people spend their entire lives accumulating savings. While many see retirement as the time to finally enjoy the rewards of a lifetime of investing, it’s also important to ensure some regular and ongoing income through interest and/or dividends.

Diversification

Regardless of what age group you are in, you should know that the only way to grow a portfolio and minimize risk and volatility is to diversify. Spreading your assets among several different types of investments will balance your portfolio and minimize downside. Some of the asset classes you should include are stocks, bonds, and short-term investments. You should also aim to diversify your investments within each asset class. By doing so, you further minimize risk because you are less likely to take a big hit when a single investment underperforms.