Financial Fitness


When are you too old to start investing?

Posted at 3:49 PM, Apr 04, 2019

At my current age, is it too late for me to invest?

This particular reader told us that they are 48. But even if this person were 58, 68 or 78, the answer would be the same.

No! It's never too late.

It's also not too early, even if you're in your 20s or 30s. Along those lines, we've received several questions from millennials about how they should be investing for both the short term and long haul.

How you invest depends a lot on your age and financial goals.

If you're looking to stash away a nest egg for retirement, for example, you'll need to adjust your strategy as you age.

Holly Newman Kroft, managing director of wealth management at Neuberger Berman, said she tells younger clients that they should own more growth stocks than bonds.

But several readers, including a few in their 60s and 70s, have asked us how much money they should have in fixed income. Kroft said investors who are closer to retirement age need more of an element of safety and should look at bonds and dividend-paying companies.

"When you are older, preservation of capital and income are more important than growth," Kroft said, adding that as a general rule, investors should start with about 60% to 80% of the money they've set aside for investing in stocks and whittle that percentage down a bit as they near retirement.

Christine Benz, director of personal finance at Morningstar, said one easy way to do that is with target date funds, which are investments that adjust the mix of stocks, bonds and other assets as you get older.

More risk early on and play it safe as you age

Those types of funds will automatically skew toward riskier growth investments in your 20s and 30s and become more conservative as you get older.

"Target date funds can be a great way to simplify investing," Benz said. She added that these types of funds keep investors from making one of the biggest mistakes: buying only the types of things that have done well recently instead of thinking ahead.

"Stocks have crushed everything else in the past 10 years, but that doesn't mean you should ignore other assets," Benz said.

Morningstar recommends the Vanguard Target Retirement and BlackRock LifePath Index funds as low-cost ways to invest for retirement. Benz added that Fidelity and T. Rowe Price also have good target date options.

But investors might need to do more than just invest in funds that are the equivalent of a set it and forget it rotisserie oven. Kroft said one mistake that investors make is to assume that an investment they make today will still be suitable years from now.

One size does not fit all for investing

Just look at the bond market. Long-term Treasuries have typically been a great place for older investors looking for yield to stash their cash. But we've been living with ultra-low interest rates since the financial crisis of 2008.

"The world is not set in stone. Environments change," Kroft said.

Of course, there is no one size fits all approach to investing, no matter your age.

A single person in his or her late 50s living in an apartment can probably be more aggressive than a married couple in their early 30s that has a mortgage and is trying to save for their kids' college and pay off their own student loan debt at the same time.

If retirement is your ultimate goal, then don't go crazy with your investments — no matter how old you are, Benz said. Stay away from fads like cryptocurrencies and cannabis stocks. Stick with tried and true investments.

"You want things that are pretty vanilla," she said. "You don't want to roll the dice on more arcane assets. Be careful with dabbling in more exotic securities."