One of the few things we are certain of throughout life is change. From an investment standpoint, we see how financial availabilities and obligations change and evolve as life itself does. From early adulthood to retirement, each stage requires a different approach to maximize returns and minimize risks, subject to the needs that these periods entail. In this article, we will review recommendations from a more general point of view, regarding what to invest in and what strategies to adopt according to age.

In young adulthood, there is usually a higher tolerance for risk due to the possibility of having a long-term investment horizon. It is advisable to take advantage of this by investing in high-yield assets subject to higher volatility, such as equities and equity mutual funds. Moreover, this is the time of life when investing in education has a positive influence on future income, as well as being compatible with the pace of life and the start of working life. Harnessing the power of compound interest by investing in financial instruments that compound over the long term is also an important strategy. The key to young adulthood is to consider time on our side; both from a compound interest standpoint and from an ability to deal with volatility standpoint.

During the second third of working age, financial stability begins to take on greater relevance. Income tends to be higher, hand in hand with labor consolidation, allowing for greater portfolio diversification. At this time, a combination of variable income and fixed income instruments is recommended to balance risk and return, allowing to continue the profitability obtained in the previous stage and to establish certain levels of capital preservation. It is a good time to include real estate and commodities in the portfolios, with a focus on tax efficiency, in order to maximize the benefits in the vital context that this period provides. Financial stability and prudent diversification are fundamental. It is suggested to invest in balanced investment funds and fixed income securities with high credit rating and liquidity. Also, diversifying in foreign currency can be beneficial to protect against local volatility. The key at this stage is to achieve balance in our portfolios.

In the last third of the working life, retirement begins to loom on people's horizons, so the investment strategy must become more conservative to preserve the accumulated capital and not generate surprises in contexts where time is no longer our main ally. It is advisable to focus on conservative funds and assets that maintain capital and generate stable income. Focusing on fixed income instruments, capital preservation, with short durations, that allow protection against inflation and with good liquidity is a winning alternative for this stage. Also, diversifying internationally can protect against local volatility and inflation, always taking into consideration the capital preservation principles mentioned above.

Each stage of life presents different financial challenges and opportunities. It is essential to adapt investment strategies to changing circumstances and seek expert advice to make informed decisions. From investing in education and high-risk assets at the beginning of working life, to investing prudently in capital preservation, to breaking even. Each stage requires a specific approach to maximize growth potential and ensure a stable financial future.

Gabriel Haensgen
Financial Funds Analyst Fynsa AGF