Investment decisions should change as people move through different stages of life, as a strategy suitable for a young person building wealth may become risky for someone approaching retirement.
Financial planning is not a one-size-fits-all process. Age, income, family responsibilities, financial goals and the number of years before the money will be needed should determine how a person invests.
For young adults in their 20s and 30s, the focus is usually on building wealth. At this stage, investors have more time ahead of them and may be better placed to recover from short-term market losses.
Depending on their financial situation and ability to take risks, younger investors may consider growth-focused investments such as shares, real estate and other assets with the potential to increase in value over the long term.
However, young people should not invest all their money without keeping funds for emergencies. Having accessible savings for unexpected expenses can prevent an investor from being forced to sell long-term investments at the wrong time.
As people enter their 40s and 50s, their investment priorities often begin to change. Retirement is getting closer, family responsibilities may be higher, and protecting accumulated wealth becomes increasingly important.
At this stage, investors may need to gradually reduce their exposure to highly volatile investments and increase their holdings in more stable assets. The goal should be to maintain reasonable growth while reducing the risk of major losses.
The approach changes further during retirement. Once regular salary income stops, investments may need to provide money for daily living expenses, healthcare and other needs.
Retirees may therefore consider a balanced mix of income-generating investments, including suitable fixed-income instruments, dividend-paying shares and real estate. The objective is to generate regular income while preserving capital for as long as possible.
Taking excessive risks during retirement can have serious consequences. Unlike younger investors, retirees may have fewer opportunities to rebuild their wealth after a major financial loss.
Another important consideration later in life is wealth transfer. After spending years building assets, investors need to decide how their wealth will be passed on to family members or used to support causes that are important to them.
Preparing a valid will and putting proper estate planning arrangements in place can help ensure that assets are transferred according to the owner’s wishes. It can also reduce the risk of family disputes and the loss of wealth after death.
For Nigerian investors, inflation and currency depreciation make regular investment reviews particularly important. Money kept in investments that fail to keep pace with rising prices may gradually lose purchasing power.
This means that investors should not simply choose an investment and forget about it. Their portfolios should be reviewed regularly as their income, responsibilities, goals and economic conditions change.
The key lesson is simple: investment strategies should grow and change with the investor.
Young people may focus more on long-term growth. Those approaching retirement may need to balance growth with capital protection. Retirees may place greater emphasis on regular income and preserving their wealth, while older investors may also focus on succession and legacy planning.
A successful investment strategy is therefore not necessarily one that produces the highest return at every stage of life. It is one that matches the investor’s current needs, goals, responsibilities and ability to take risks.