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Investing Decisions Over Investor Life Cycle

Investing Decisions Over Investor Life Cycle vary as a in accordance with the age bracket. Investors tend to follow different investment philosophies as they move through different stages of the life cycle. Investment decisions are made by investors and investment managers. Investors commonly perform investment analysis by making use of fundamental analysis, technical analysis and gut feel. Investment decisions are often supported by decision tools. The investor life cycle refers to the different stages of investment ownership, from the initial purchase, to the sale of the investment. The most commonly used investor life cycle includes the accumulation phase, the consolidation phase and the spending and gifting phases. These phases if put into ages refer to the youth stage, the Middle-Aged and the Retirement Stage respectively.

  1. Youth Stage: accumulation phase

–Twenties and thirties

–Growth-oriented investments

–Higher potential growth; Higher potential risk

–Stress capital gains over current income

  • What are some examples of age-appropriate investments?

–Common stocks, options or futures

2. Middle-Aged Consolidation Stage

Include people of aged between 45 to 60

–Family demands & responsibilities become important (education expenses, retirement savings)

–Move toward less risky investments to preserve capital

–Transition to higher-quality securities with lower risk

  • What are some examples of age-appropriate investments?

–Low-risk growth and income stocks, preferred stocks, convertible stocks, high-grade bonds

 3. Retirement Stage; gifting phase

A gifting phase is when a person begins planning for or actively begins giving away wealth as part of his or her estate planning. Happens with ages of 60 years and older

–Preservation of capital becomes primary goal

–Highly conservative investment portfolio

–Current income needed to supplement
retirement income

  • What are some examples of age appropriate investments?

–Low-risk income stocks and mutual funds, government bonds, quality corporate bonds, bank certificates of deposit

Investing Decisions Over Investor Life Cycle

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