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It is common knowledge that Financial Planning differs for each individual. People in different age groups will likely have different investment objectives as well. The following example showing 3 categories of people helps illustrate the needs and investment preferences of each age group of varying status
1.1 Young Adults Aged 25
This is the early phase of ones working career, time when you are starting to accumulate wealth. Routine expenses are not that heavy. Starting to invest at this young age can help with expenses and retirement and enhances potential rewards from the investment. At this age, your career is only beginning and leaves ample time to generate income. This provides the ability to take on greater risks when for example, compared to another career person earning the same income but already at older age.
Therefore, to enhance potential returns from your investment, you may opt to allocate your investment into equities which increases the chance of achieving a high return.
1.2 Working Married-Couple In Their 40s
An age group that should place importance on planning for long term needs, meaning an investment strategy to meet retirement spending and childrens education (if any). At this juncture, you already have sizable savings but may still need to see money invested generating returns to help meet expenditures.
Your investment strategy should be adjusted to take on less level of risks. For example, an investment heavily focussed on equities may no longer be prudent from now on and one may wish to start reducing the amount allocated to equities, going forward. Shifting parts into other type of investments to lower the overall risk would be the desirable route.
1.3 Married-Couple Having Reached Retirement at Age 60
You are now at the stage where you will be relying on savings accumulated over your working career to cope with spending. The wealth you have built and any other sums received upon retirement must now be put to use effectively so that it can support you as long as possible. Be prepared that it is possible to incur higher expenses than before, as items such as health bills and travel expenses pick up.
For this age group, the investment strategy to adopt would be one with a risk level that is low-to-medium and offering consistency of returns that youll need to meet your regular expenditures. It is also advisable to minimize the portion invested in equities, although the need to generate enough to cover all expenditures will be an important consideration as well.
It is recommended that you review your investment policies at least once a year. As time progresses, the period allotted for your investments would have elapsed by another year. It is not unusual that you may find yourself taking a slightly different view from the investment targets originally chosen. As such, it would be a suitable time to make revisions to your investment targets and strategies, if it looks necessary.
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