Stock Market Investment Strategies For Different Age Groups

How you choose to invest in the stock market can be dependent on a large variety of factors. One of these is your age.

Young people for example are better off pursuing a more aggressive investment strategy that focuses on growth, whilst older people, or people with others dependent on them, are better off adopting a more conservative approach when investing in the stock market.

In this article, we will look at the different types of investment strategies that can be pursued by people in different age groups.

Investing In The Stock Market When You Are Single

If you are aged 20-40, or are single and living on your own without any dependents, then you can be a bit more aggressive than other investors when investing in the stock market.

The reason for this is because you don’t have any people dependent on you for support, so if you make a bad investment in the stock market, only you will get hurt by it.

In addition to this, being single also makes it a lot easier to recover from financial setbacks, since you won’t have to put aside extra money to support young children or a wife.

For single people who are looking to invest in the stock market, it is generally recommended that you go for a mixture of small cap and large cap growth stocks in growth industries.

Invest some of your money in five to seven stocks and put the rest in growth stock mutual funds. This is a good investment strategy to begin with when first investing in the stock market, and as the market changes, you can then adjust your strategy accordingly.

Investing In The Stock Market When You Are Married With Kids

If you are married with children then it recommended that you take a more conservative approach to stock market investing.

Obviously because you have people dependent on you, you want to make sure that you have enough money to support them first before you make investments which may or may not work out in the long run.

When investing in the stock market with dependents to support, try to go for a mixture of large cap growth stocks and dividend paying defensive stocks.

Invest some of your money in five to seven stocks and the remainder in growth and income mutual funds. You may also want to consider setting some money aside for college in a growth orientated mutual fund or in savings bonds.

Investing In The Stock Market When Preparing For Retirement

If you are over 40 and single, or over 40 and married, it is recommended that you start to convert your portfolio from aggressive growth to conservative growth.

Move your money out of individual stocks and into less volatile investments, such as balanced funds, investment grade bonds and bank certificates of deposit.

It is also a good idea to start thinking about what your financial needs will be when you retire, as this will help you to fine tune your investment strategy and determine at what age you will achieve financial independence.

When investing in the stock market at age 40 and over, consider five to seven large cap stocks that are predominantly dividend paying defensive stocks in stable and needed industries such as utility or food companies.

The rest of your money can be placed in balanced mutual funds and short term investment grade bond funds. A large portion of your money can be kept in savings bonds and bank investments.

Stock Market Strategies For Retirement

When you are retired, preserving your money should be your primary investment strategy rather than growing it.

As a result, it is recommended that you focus on developing safe and reliable income streams. The idea is to preserve what you have so that you have sufficient money to cover your retirement years, without jeopardising your financial standing.

However, whilst you do want to adopt a conservative approach with the majority of your investments, due to rising longevity and inflation, you also want to keep some growth in your portfolio to ensure you continue to meet your financial needs as the years pass.

It is also a good idea to review your investments annually, so that you can determine whether the stock allocation needs to be adjusted.

When investing in the stock market at retirement age, it is generally recommended to go for a mixture of large cap stocks dominated by dividend paying defensive stocks in stable industries.

Try spreading your money out over three to six stocks, and put the remainder in balanced mutual funds and short term investment grade bonds funds.

A large portion of your money should be kept in savings bonds and bank investments.