Why Your Age Is A Factor When Selecting A Mutual Fund

Last post I mentioned that your current age should be considered when selecting a Mutual Fund. Here is my reason that age matters. When you’re first starting out in your early 20’s you have more time to make mistakes. That being said you can invest more aggressively and take on more risk than someone in there 30’s, 40’s, and 50’s.

In my opinion if your risk tolerance allows it, investing aggressively in your early 20’s gives you a great advantage to building wealth rapidly early on so that later in life you can reduce your risk and become less aggressive as you reach retirement. Time is on your side!

As you continue on the age spectrum you will gradually reduce your risk. In your 20’s and 30’s you’re looking for capital appreciation, which means building your wealth. In your 40’s you still are looking for capital appreciation, but you are getting closer to retirement and you can’t take on the same level of risk since you have less time to recover any losses your portfolio may incur if the market happens to take a dreaded turn to negative town.

Lastly, in your 50’s you’re looking to preserve your capital. You have had the opportunity to build wealth and now you are looking to have that money last into retirement. Your goals and objectives should change over time. Build wealth early, preserve wealth near retirement, and use your wealth as income during retirement.

Now that we all have determined are age we must select the right Mutual Fund to invest in. First we must briefly cover the 3 main types of Mutual Funds listed below. These are Equity Funds, Fixed Income Funds, and Balanced Funds.

Equity Funds invest in stocks and are said to carry the most risk. Equity Funds carry higher risk, but have the potential for higher reward.

Fixed Income Funds invest primarily in bonds and other forms of debt to create income from the underlying investment. These are great for people who are approaching or currently in retirement.

Balanced Funds as you may guess invest both in Equities and Income producing products. These types of funds are suited for those who want less risk but still want to have some capital appreciation.

Hopefully, this gave everyone a better idea of factoring in age into your investments. Your age matters.  Invest for your age!

Thursday I will cover a few different funds that you may have heard of- Aggressive Growth, Growth, and Value Funds.

Have a wonderful Sunday!

Thank You,

Clay-

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