[VIDEO] Younger Investors vs Older Investors

Do you feel older people should be invested the same way as younger people? Probably not. And why? Well, when you’re younger and the market experiences significant corrections or crashes, you have time to wait for it to come back. But as you get older, and these corrections or crashes happen later in life, they can adversely affect even the best-devised retirement plans.

While accumulating assets during your younger years, it often makes sense to take a more growth-oriented approach to retirement investing. If started early enough, younger people have 30 to 50 years to allow their savings to grow. And because they have time to recover from a market downturn, investing more heavily in equity investments (like ETFs, mutual funds and stocks) allows them to take advantage of the potentially higher returns that can be realized over long periods of time.

On the other hand, as we get older, we don’t have time on our side. As we age, our investment focus should shift towards safety and protection of our nest egg. As you head into retirement, your main earning years will be behind you. Yes, It’s important to continue to keep your money working for you with the strategy of growth over time, but you also need to hedge and reduce risk as you get older to guard your retirement funds with as much principal safety as possible. That being said, a great exercise in figuring out the appropriate amount of risk you should have in your portfolio is to perform a risk assessment and examine how you respond to questions that directly measure your risk aversion. These questions help determine your risk tolerance, time horizons, income needs, goals and objectives, and can typically offer some additional guidance as to how much risk you’re actually taking, and what may be a more appropriate mix for you. This can help determine how you should be investing your money based on your personal financial situation, and a financial advisor can help shed some light on this for you.