All the world’s a market and all men and women are merely investors. We have our moments when we enter the market and when we exit and in our lifetime, the way we invest changes as we age. From saving pocket money in a piggy bank to making strategic investments for lowering your tax burden as a white collar manager, our age can define the pattern of our investments. In this piece, we will explore what kind of investments are made at each stage of one’s professional career.
If you decide to save money physically in a safe or even in a bank account, it is only going to decline in value every year as inflation works to make the same amount money worth less. Investing is the smartest way to save money, as it ensures that the value of your savings increases with time and can even provide you with a secondary source of income. Different stages of life and career growth necessitate different kinds of investing strategies. Your investment portfolio is like growing a tree. You need to plant the seed early, water it regularly and care for it over years before it finally is capable producing fruit or providing you with shade in your golden years.
Early Career (20s)
It is critical to spend this point of your life understanding the essentials of investments, financial markets, and personal finances. As difficult as this may sound, it is the perfect time to make retirement funds a priority. Money invested in your 20s has more time to accrue interest and will worth more when it comes to retiring. This is also a stage when it is possible to take a lot more risk in your portfolio. Modern day banking is also a boon and it can be leveraged to invest outside the country of your birth. Look at emerging economies that have the potential to grow; imagine investing in Germany and Japan in the 1950s or in China in the 1980s and 1990s to see the kind of returns one can expect on early investments in a growing economy. It is also crucial to keep a certain amount aside as a rainy-day fund, which can also be used for things like paying for your own wedding.
Sometime around the age of 35, your investing decisions will slowly go from risky or aggressive to conservative and safe. This is when you have enough funds in your portfolio that your first thought is to protect and preserve them. These are also strong earning years, when your priorities shift to buying a house, saving up for your children’s future education costs, or going on that world cruise with your significant other. It is critical to leverage the additional income you earn in these years by saving more than you did before and budgeting carefully for all your earning, to optimize on your savings.
You can explore Annuities as an investing option. If you had invested for retirement in your 20s, that should take some of the burden of retirement off you, nevertheless you should spend this time ramping up your retirement investments. This is a time when you will find yourself investing in a wide variety of financial instruments such as equity, bonds, and property. Buying land or even your first house in your mid-30s is a good decision, as the value of land takes many years to increase and whether you are planning to sell it for a profit later or are expecting the area to develop, both of these eventualities are going to take at least a decade.
Late Career (50s)
At this stage in your life, you should be in a comfortable place, financially. Those earlier investments in your children’s education should have been enough to provide them with an excellent schooling and your retirement nest egg is looking not too shabby. Furthermore, your career is at a place where you are at your peak earning power. This is the ideal time to maximize investments in your retirement investment accounts. Investments tend to take on a far more conservative shift right now. Consider moving your assets into fixed-income securities and bond funds to find a better balance between growth and safety.
If by following the above steps you have managed to put aside a nice retirement nest egg, remember that your health notwithstanding, retirement can last as long as your career. Start taking money out of your investments slowly, making sure that you always have something in your portfolio that can last you another ten years or so. Do not stop investing, between the age of 65 and 85 is twenty years during which your entire income will come from interest accrued on these investments. Tax savings are abundant for senior citizens, the Senior Citizen Savings Scheme is a good place to start where you can invest up to INR 15 lakh in a fixed deposit for a period of up to 5 years and obtain a 1 lakh tax rebate. Sections 80 C, D, and G of the tax code allow for greater tax rebate limits for senior citizens, particularly in rebates for health insurance.
Financial freedom is a wonderful feeling and keeping that financial freedom in old age is even better. No one can predict the course your life is going to take, but by investing diligently and regularly for your retirement and for emergencies, you can ensure that no matter what surprise is thrown your way, you will be ready to face life’s challenges head on.