Life stages & Investment decisions

Making the decision to invest for your future is an excellent first step to building your financial security. However, as time goes on and your lifestyle changes, it is important to keep a regular check on these investments.. It is likely that the balance of the investments in your portfolio will need to slowly evolve, not only in line with changing market conditions, but also personal factors such as your investment goals, your personal circumstances and perhaps most notably, your age.

The level of risk you are prepared to take, along with your investment growth and income needs, are likely to change throughout the different stages of your life, with each stage potentially requiring a different balance within your portfolio . We have provided examples of typical stages here.

• Under 35 - Retirement could feel a long time away and the bulk of your income may be earmarked for short -term goals such as getting onto the property ladder. However, the earlier you start investing the greater chance you have of building a significant nest egg for later years. With many years ahead of you, you have more time to recover from any potential market downturns. Therefore you may be able to afford to consider higher risk and more aggressive growth strategies. You may also want to consider short- term liquid investments in order to establish a cash reserve for emergencies.
• 35 to 45 - Together with an increase in income, your family obligations and expenses may also be increasing . Longer-term goals such as saving for retirement or your children's future education will require investments that seek capital growth, while more immediate goals such as paying the mortgage and school fees, may require you to look for investments that can offer a regular income. A balance between capital growth and income may provide an efficient way to achieve your goals. With longer-term investments , time is still on your side and you may therefore still be able to afford to consider a higher level of investment risk.
• 45 to 55 - Hopefully by now you will have accumulated a reasonable portfolio of investments. At this time, with retirement gradually approaching, capital protection becomes a greater concern. You may therefore wish to become more conservative in your investment selection and prefer a medium to low risk portfolio. While it could be time to begin lowering your investment risk and start a gradual shift away from equities towards the safer territory of bonds, it may not be the time to desert equities altogether . Equity income funds that offer a combination of rising income and capital growth may be an attractive option.
• Over 55 - Retirement is now approaching and as you have fewer years to recover from any capital losses , the time for risk taking is largely behind you. Minimal risk portfolios with a high degree of capital security are often preferred at this stage, as are investments that seek to provide income. Bullish investors may consider maintaining a proportion of investments within equities, however this is conventionally the time for capital protection.
• Retirement - You will need capital preservation in order to secure a lump sum, which will provide you with an income in your retirement years. Again, minimal risk portfolios with a high degree of capital security are often preferred at this time. You may also want to consider moving a significant portion of your portfolio to investments that seek income. Corporate bond funds start to come into their own here, with more cautious investors leaning towards investment grade bonds. Transferring your investments to a bank or building society account will of course eliminate all market risk.

Whatever you age, your investment will need regular monitoring and review to ensure you are correctly invested for your ever changing needs. F H Manning offer a number of monitoring services and if you would like to discuss this further please do not hesitate to contact us.