We all know how important investments are as a part of financial planning and how they can provide greater comfort and safety for the future. Although it is popular to encourage young people to invest, it is even more important for clients over the age of seventy to maintain or to begin investing prudently.
There are many examples of people who are living longer and healthier lives. So, it is not strange for clients to reach their seventies and beyond while maintaining the bulk of their wealth. However, that wealth still needs to be professionally managed to maintain the integrity of the clients’ investments to ensure their financial well-being.
Most investors are looking for growth or income, however, for clients over seventy years old, capital preservation becomes a key investment objective. My clients are usually focused on protecting their savings and maintaining a steady source of income. They are mainly risk averse, although I have had a few clients who surprised me with their high-risk appetite.
In the same way that investors are taught about the importance of diversification, investors who are older need to be diversified just as much if not more than other investors. This is due to their inability to recover from market shocks. They must carefully consider the risks inherent in the specific investments and make sure that they are spread widely enough across different assets classes, including stocks, bonds, real estate, and alternative investments.
You may be wondering what type of investments would best suit a mature investor seeking capital preservation and income. The most attractive investments would be income-generating assets such as dividend-paying stocks, bonds, or real estate investment trusts (REITs). These investments offer somewhat predictable and consistent returns which are important to augment limited retirement income. Inflation is still the enemy, and its impact should be carefully weighed each time new investments are contemplated.
While age brings wisdom, unfortunately it also brings health challenges and increasing medical bills. Therefore, it is particularly important for investments to be focused on liquidity. Investors need to find options that can be readily converted to cash. This does not mean that the whole portfolio has to be liquid. If the client has a large enough portfolio, they will probably want to invest for their grandchildren as a means of creating generational wealth. All these are considerations depending on the size of the portfolio.
Since mature investing brings distinctive challenges, seeking professional financial advice is crucial. Engaging the services of a knowledgeable financial advisor, preferably one with experience in working with older clients, can help to create a smooth journey. That advisor will help to simplify the complexities of investment options and provide personalized investment strategies designed for the specific needs and goals of clients over seventy.
Regular reviews and adjustments are important to ensure the portfolio aligns with the client's evolving financial requirements. And although we don’t like to mention certain things, it is important that proper planning is in place for eventualities such as cognitive challenges or death. These should be faced head-on. Preparation brings peace of mind for navigating the future.
Lisa Minto is the Assistant Vice-President, Personal Financial Planning at Sterling Asset Management. Sterling provides financial advice and instruments in U.S. dollars and other hard currencies to the corporate, individual and institutional investor. Visit our website at www.sterling.com.jm
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