Your personal investment needs change based on where you are at in your life. Creating different investment strategies for every stage in life can help solidify a personalized investment plan and reach your goals in the smoothest way possible.
People change. Your wants and needs are not the same as when you were a teenager, and your life reflects this. It is much the same with investments. Your investment plan should match your needs at any given time. Below are 4 different stages of the typical investor’s life.
In the younger years of life, the soloist investor does not have the responsibility of a significant other or children. They have very little need to worry about age, and can usually invest more of their earnings than in other stages of life. The Soloist may invest up to 70 percent of their earnings in some strategies. During these younger years, the investment strategy is usually aggressive. Because time is not a factor, taking a high risk approach means bigger payoffs. And if the high risk approach fails, there is still plenty of time to recuperate losses.
The soloist may start investing in stocks, mutual funds, life insurance and ULIP, PPF schemes, TIPS and bonds at this stage in their life. Whether these investments carry into other stages will vary.
Our soloist has found a significant other to share their life with. Their world is changing, and their investment plan will have to change as well. A significant other may mean a financial dependent, or at the very least a need to be more financially responsible. The Partner stage investor usually wants to invest less, maybe up to 40 or 50 percent of their earnings. This is due to an increase in expenses, which they will definitely need more money to cover.
A partner stage investor will usually want a balance between risk and return, and may find themselves investing in real estate, equities, mutual funds, and debt instruments like loans and bonds.
An investor with a child is an entirely different person than say a soloist investor. Their priorities are on creating a better life for their growing family, and their wealth management plan will need to match their new role.
A parent investor usually has higher expenses and lower savings than any other investor type. Because of this, their investment strategy is going to shift towards a very low risk, low return strategy. They may need to build off of prior investments, and will likely only be able to invest up to 20 or 30 percent of their earnings. They often seek out ULIP, life or health insurance, or child plans.
The retiree can have a few different focuses. The main one is comfortably enjoying the returns from their successful investments. As they are retired, they will also need to have liquid income for expenses, and will generally invest the least of any group. Retirees may also want the lowest risk factors for their investments, and may be interested in more short term investments, as time is a priority for them.
Possible investments during the retiree stage include pension plans, fixed deposits, immediate annuities, or senior citizen’s savings schemes (SCSS).
Every one of these investment strategies for different stages in life has one thing in common – you. As such, they may shift and change any number of times based on what you personally need. No single strategy is going to work every time across the board. This is a general guideline for where responsibilities and investments may shift as investors go through life.
The difficulties with any investment strategy will always be discipline and knowledge. Discipline is self-taught, but knowledge is learned through others. The team at Generations Wealth Planning has decades of real-world knowledge, ready to share with you. Contact Generations Wealth Planning today to plan for every fruitful stage of your financial life.