Investment Strategies for Different Life Stages

by Kevin Smith Author

Retirement planning these days involves more than just saving for a rainy day. Financial planners will recommend different investment strategies for the different stages of life that you pass through as you grow older and reach retirement. This is done with retirement investments in Jefferson, NC, to balance risk and reward safely to ensure that your nest egg can grow as large as possible.

Higher-Risk/Low-Risk Investing

When you are young, a financial planner will encourage you to take more risk with some of your money while allocating other money to investments with lower, but guaranteed returns. The reasoning is that on higher-risk investments, the returns are much higher thereby making you more money. That gives you more money to invest. On the flip side, if you lose out on these higher-risk investments the rationale is that you’re young and your other safer, low-risk investments still have time to grow.

A good financial planner will adjust this strategy over time as you grow older. They will advise you to take fewer higher-risk investments in favor of more low-risk investments. Once a person turns 50, a person should focus almost entirely on low-risk investments that still pay a good dividend and take the conservative investing approach.

Asset Allocation

You shouldn’t need a financial planner to know never to put all your financial eggs in one basket. So much in life and the economy and business is unpredictable. That surefire, high-return investment could go up in smoke leaving you with nothing. If you’re all-in in the stock market, the economy could head south due to a recession. Do you have the time to wait for the economy to bounce back and the stock market to rally? There’s lots of great stories about how grandma purchased AT&T stock 50 years ago. Or you could move your money over to bonds, but what if inflation rears its ugly head? That’s why when it comes to retirement investments diversification is key.

Look into the Crystal Ball

As one nears retirement, there are three questions every person needs to ask themselves. But unfortunately, all you can do is give your best guess.

1) How long will you live?

2) How high will inflation go?

3) What medical expenses may come up?

These areas of age, inflation, and health are what will determine where your retirement dollars will be spent. Based on your health and life situation, these issues should give you the idea that your retirement investments still need to be earning money, but in the least risky ways possible. Some financial planners will recommend remaining in the stock market, but with older, blue-chip companies that have shown slow, but steady growth over the years. Another option is to build up reliable bond holdings and have a cash reserve at a small rate of return. Ultimately, the thing with retirement investments in Jefferson, NC, is to balance risk and reward safely to ensure your nest egg can grow as large as possible.