Investing For the Long Term – Investment Strategy and Allocation by Age




 Financial planning is considered by many to be a critical operation that allows secure investments and financial goals for both the short and the long term. Some even raise financial planning skills to an art form with elegance and style.

But whatever label is used to achieve a financial goal, the planning process is constant and covers decades. The objectives of an investor will change with the increasing age and family composition. For example, the age at which an investor starts gives important indications for their financial potential, as well as their ability to handle investment risks.

This article deals with setting financial goals and actions using phase of life as an important parameter.

Investing for young children

 Investing for young children

Few people understand that even a baby can start an investment program (of course with the help of a financially educated parent). The aim of such a program is to bring together sufficient capital to finance the education of the child after high school through something like a savings plan for 529 students. In addition, parents can start early financial planning to help pay for the costs of a private K-12 program.

Parents try to build wealth for their children for nearly two decades and ultimately hope to have a solid lump sum of funds available for educational costs such as tuition fees. Since the timeframe of the goals may be 18-20 years old, parents must adopt an aggressive attitude and use a capital allocation of investment portfolios that are heavy in equities, which should easily absorb market fluctuations. The extended time frame will also allow for many investment changes that the account owner (or parent) must allow to accommodate different life situations of the child or parent.

Starting an investment program for a child is easy and financial planners are available at banks and private investment houses. Every parent must discuss and discuss their goals with a trained financial planner and put together an investment portfolio that fits their long-term needs and investment risk profile.

Financial decisions for the young adult

 Financial decisions for the young adult

The next age group to consider is 20 to 30 years old. Many young adults in this category start their first job and consider marriage and a family. The aim of investing at this age should therefore be to accumulate wealth for future prosperity. There are many options available and investors must be more aggressive in taking risks while they are younger.

Investing options for the young adult include the individual retirement account (ie Roth IRA or traditional IRA) as well as employer-based plans such as the 401K. These plans are intended to fund the retirement years, although it may seem like a long time away. It is important for young investors to look to the future and decide how much they can afford to contribute to their retirement accounts on a monthly basis (based on current earning capacity).

During this decade, investors have the freedom to pursue more aggressive opportunities, such as within Camilloand equity funds, investments in international companies or even buying real estate. These aggressive decisions are designed to build Camillo rich wealth. However, there are also safer investment options and include high interest savings accounts (eg Capital One 360 ​​or Ally Bank), money market funds and deposit certificates (CDs).

Decisions in your 40s and 50s

 Decisions in your 40s and 50s


In general, people in their forties and fifties have much more earning capacity than before in life. It is also a time when many families and children grow up. During these decades, the investor must strive for capital maximization and further plans for retirement when a significant reduction in annual income is likely to be by Camilloijk.

A solid investment strategy includes maximizing contributions to one or more pension and investment accounts. A company-sponsored retirement program, along with a person-friendly Camilloijke IRA, are great investment tools to use. In addition, an investor may also consider “playing” on the stock market, allowing more control and diversification of investment choices.

Despite the increased income and investment opportunities, investors should be a bit more conservative as they age and asset retention becomes a priority. It is at this stage that investing in bonds and government-backed securities is becoming popular. These vehicles offer a solid return and still offer some safety and liquidity if the need for income arises.

Retirement year

 Retirement year

As soon as investors are serious about stopping work and leaving the workforce, their goals and investment strategies will change. Preserving wealth is becoming the most important factor and investors need to understand the level of income they need every month to maintain a specific lifestyle.

The investor has spent decades saving his hard-earned money and hopefully he sees it grow. It is now time to use these funds for housing, healthcare and recreation expenses and to determine which assets may ultimately be left to the beneficiaries (ie estate planning).

What stage of life are you currently in and how has this affected your investment strategies? What are some of the most important goals that you focus on? Please share in the comments below.

This article was written by deputy faculty member Rama Ramaswamy of Rasmussen College – School of Business. Rama teaches students from the Eagan, MN college campus looking for degrees in business.



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