Author: Megan A. Lloyd
Age is a factor that has a significant influence on the design of the investment strategy. Define what stage you are and make a critical path to achieving your goals.
Everyone desires to be done, but what are in each specific case? That depends on the interests and lifestyle with which each person feels comfortable and, of course, age or financial life cycle that is, which basically involves three phases:
- Stage of accumulation (25 to 35)
Marks the beginning of working life and that is when the assets are acquired major (auto and home), are investing more in vocational education, families are formed and, therefore, also planned the education of children. Because of his age, these investors have a profile aggressively, which means they are willing to take more risks in exchange for higher returns. However, the profile may be limited depending on the financial goals you want to achieve and the date they plan to do so. Tip: the shorter time should be more moderate investment portfolio and the greater the savings effort to achieve it.
- Stage of consolidation and stability (35 to 55)
Usually, at this stage is reached the maximum level of income, so that it reaches beyond spending, freeing cash to spend on financial investment. You start planning your retreat, ideally auque start a savings plan for this purpose from the previous stage, because it reduces the need for personal savings effort for this, to benefit from compound-interest income, which can be obtained in the long term. The investor of this age is located in a profile between aggressive and heritage.
- Stage of destocking (55 over)
Start to working life, tend to decrease revenue and expenditure must be set the task was easier because the children probably ended his career. The energy is focused on generating financial revenues to allow a withdrawal to ensure the continuity of lifestyle has been taken so far. The investment profile of this age is between equity and conservative.
“There is an investment fund for each goal you envision in the different periods”
As you can see, the age a factor that has a significant influence on the type of goals you want to specify, but also in designing the investment strategy to be followed. For example, a 25 years old, single, view individual short term targets (car, vacation wardrobe gadgets, etc.). In contrast, a 35 years old, married, have individual goals but also family goals with investment horizons of medium and long term (financial plan to cover their children’s college education or starting a business, etc.).
The investment strategy we should follow should be linked to the type of financial goals you want to achieve. There is no need to use the same financial instrument to achieve all the objectives we set ourselves over our lives. It would be foolish to invest in a savings account, checking or a bank fixed-term, if our goal is to save for college education of a newborn child, because this would optimize the combination of savings with the ability of own money generate more through the right choice of investment instruments. Therefore they should be chosen as profitability and risk tools fit within the target and that we consider.
For targets of short, medium and long term investment funds (debt and equity) are placed among the best options, especially for investors with limited knowledge of the functioning of financial instruments. Investment companies are a good choice because they require accessible and yields amounts offered in time (8% debt and equity securities 15% per year on average) are much more attractive than those given by bank instruments (2 to 3 %), with rates that are lower than inflation.
Best Fund
Decide which fund investing involves more than just compare rates and choose the one that offered the highest of the day, month or year. The most profitable fund is not necessarily the best. Before making a selection is to define the strategy to be followed: how much to invest, how often and how soon. Since it is necessary to analyze what is in line with our financial needs.
It definitely should review the performance of the funds adhere to our profile, but must be done in historical terms – at least five years and compared with those obtained by others of similar composition and bechmark (value used as reference for yields other releases of the same or the same market). But the following is essential to understand: “Past performance is no guarantee for the future.”
So who can help you choose the best options? The institutions have advisors that help you to plan your financial life. That is, all carriers and distributors of funds, brokerage firms and even banks should assign you to a specialist in the field.
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