Lifestyle investing: An investment strategy that uses your age to determine your investment approach

Julie Brownlee, Fsp Invest, 11 Nov. 2014

Tags: lifestyle investing, what is lifestyle investing, investment strategy, investing age, investing



Chances are that someone in their early 20s will approach investing very differently to someone is their 50s. It all comes down to changing attitudes to risk.

This is known as lifestyle investing.

So what is lifestyle investing all about?

Read on to find out…



What is lifestyle investing?


The basis of lifestyle investing is that a person who’s saving for a long period of time can take on more risk with their money and investments than a person who needs to preserve the value of the savings they already have.

For instance, if you’re in your 20s and plan to retire in your mid-60s, you can afford to have more of your money invested in risky assets, such as shares.

This is because the value of shares can move up and down a lot. This is volatility. If you hold onto shares for long enough, you have plenty of time for the good years to offset the bad ones.

This will allow you time to build up a nest egg.


The impact of lifestyle investing on your investments


As you near retirement, which is when you’ll start to use your nest egg to live on, you don’t have enough time if there’s a fall in the stock market for your investments to recover.

At this stage of life, you’d put more savings into safer assets, like cash and bonds.

Some investment companies offer lifestyle investment plans. So they’ll automatically change investments to suit the age of the investor.

One simple rule of lifestyle investing is owning a basket of shares and bonds, and owning your age in bonds.

For example, if you’re 40, you would have 40% of your money in bonds, and the rest in shares (60%).

So there you have it, an investment strategy that uses your age to determine your investment approach.

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