Various investment strategies you can utilise at different periods of life

Various investment strategies you can utilise at different periods of life

Mutual Funds
by 5paisa Research Team Last Updated: 2022-08-17T13:12:25+05:30

Your financial plans should be adjusted as you progress through different life phases. Continue reading to learn more.

One size does not fit all when it comes to investing. Everyone has a unique set of circumstances and ambitions in life. Change, however, is a constant and should be embraced by all. Your approach to investing as a young earner may differ from that of a retired individual.

This is because as life stages change, so do financial situations. As a result, before choosing investing strategies, it is usually advisable to consider your current life stage and financial condition. This post will go through three main life phases and their associated investing strategies.

Young earner

Young earners often have no financial commitments to cater to because the majority of their parents continue to contribute to the family's income. This allows them to gaze at a cash flow surplus. However, how they use it will determine their financial future. Typically, people either spend or invest their surplus. However, we believe that people should avoid such extremes and maintain a healthy balance between investing and consumption.

Investment strategy: You must first determine your risk tolerance. You may be able to take risks on the conscious plane, but not on the psychological level. As a result, understand your risk profile. Then, to begin and gain experience in investing, begin investing in aggressive hybrid funds and even in equity index funds. Then, as you acquire expertise, you may shift your portfolio to be more geared toward equities.

Middle Age having family

In middle age, you might be in one of two situations: you have a family or you don't. By "family," we mean your spouse and children. Those without family can still use the strategy you used as a young earner, as explained above. Before you may relax, you must first comprehend your financial obligations. Now that you have a family, you have certain financial obligations to meet. Needs such as a child's education, marriage, purchasing your first home, and so on. Remember to invest initially for those financial goals that you cannot postpone to a later date.

Investment strategy: You are quite mature at this point in your life and understand your risk-taking abilities and willingness extremely well. As a result, depending on the situation, you may want to consider having a decent mix of equity and debt mutual funds to assist you to accumulate for various financial goals. It was said that for short-term aims, investments should be placed solely in low to medium-risk debt mutual funds. This will ensure that your financial goals are not jeopardised as a result of excessive volatility in equities.

Retirement

Yet again, there are two possibilities at the retirement stage: either you continue to work as a doctor, lawyer, or other professions while totally retired, or you don't. And again, the capacity and willingness to take risks are both lower in the group of those who are solely retired. Those that continue to operate their profession will have a larger risk appetite owing to the continuous flow of money.

Investment strategy: If you have a restricted income at this point in your life, it is advisable to have a solid retirement plan in place that outlines how you intend to manage your cashflows. However, if you are the one who continues with your profession, they should also have a suitable retirement plan in place, and they may also invest in a tactical portfolio. This will not only assist them to play it safe in retirement, but it will also help them to earn returns by making clever decisions.

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Investment/Trading in securities Market is subject to market risk, past performance is not a guarantee of future performance. The risk of loss in trading and investment in Securities markets including Equites and Derivatives can be substantial.

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