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Why Your Investment Portfolio Should Become More Conservative as You Get Older

Why Your Investment Portfolio Should Become More Conservative as You Get Older

October 10, 2017

A wise man once said, “It is better to make your money work for you rather than working for your money.” If you wonder what this means, it is time for you to consult with a wealth management specialist. 

Whether you are holding onto a shiny new degree, or have been on a career path in corporate America for some time, you are going to retire one day. Now is the time to get serious about investing in your future.

Most investment advisors will tell you that the younger you are, the more aggressive your portfolio should be, and conversely, as you grow older, your portfolio should be more conservative. Here are some guidelines as to why this is necessary and prudent. However, the best way to have your money work for you is to consult with a knowledgeable wealth management specialist that can tailor your portfolio to your specific goals.

Why Taking Risks With Stocks Is Better for Younger Workers (Most of the Time)

When you are just starting out in your career, most of your earnings are ahead of you, and those earnings should increase as you advance your career. If your high-risk stock does not pan out, the capital invested is only a small percentage of what you will earn over your lifetime.

Another reason for aggressive investing in stock and mutual funds while you are young is that the law of averages works in your favor for most high-risk investments. The stock market historically goes up over the long term. Within that long term, it can take some pretty steep dips, but overall you’ll typically come out ahead. Stocks can have a high reward, but you must be able emotionally and financially to ride out the lows.

If you are still youthful, but maybe not in your early thirties anymore, it is time to start transitioning a percentage of your portfolio to more conservative investments. This is just hedging your bets. You still have quite a few years of earning ahead of you, but would like to hold on to some of your investment principal. You do this with a moderate risk portfolio, which is a combination of stocks, aggressive, and bonds, conservative.

You still have the high-risk high reward of stocks, while maintaining some of your money in the sure pay-off of bonds. You can build your portfolio to any combination of the two, dependent again on how

soon your money will be needed, and how willing you are to accept any losses of money that may occur.

Why Minimizing Portfolio Risk Is Better for Workers Near Retirement

When retirement is within reach, it’s shouldn’t be a surprise that your money should be securely tucked away into bonds and conservative investments. You will need your money soon, and any downturn the market might take could be very unfortunate for you at this point. If you still like a little risk to keep things spicy, that is fine, provided you keep enough of your principle secure.

This is just a basic guideline of investing at any age, and there are experts that know the market, and will get to know you and your needs. If you are young, but can’t handle the losses the stock market may bring, more of your money should be in bonds. It does cost you in the long term, but offers stability in the short term, which may be what you need. Also, if you are looking at retirement within fifteen years, it’s possible you have enough money securely invested, that you can afford to be aggressive with some of it.

Consulting a wealth management specialist will help you make important investment decisions that will allow you to sleep better at night, growing your money as quickly as possible while you dream. Call Vault Wealth Management in Palm Beach Gardens today at (561) 223-3252, and let us help you invest in a way that best meets your risk ability and goals.