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Financial Planning 101: How To Invest By Age

April 18, 2013
Investing, Investing Data
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by Susan Lyon

There is a lot of time tested, universally accepted wisdom around building your investment portfolio that we want to break down and share so you can have your own a ‘financial planning day’ at home.

The Investment Lifecycle: Why We Should All Be Investing By Age

How old you are determines what types of investments you should make, and how much of each asset class you should buy relative to the others.  Basically, the advice is to become an incrementally more conservative (and more risk averse) investor as you age.  NerdWallet’s infographic breaks down Malkiel’s investing advice by age:

First authored in 1973, Malkiel’s famous book A Random Walk Down Wall Street lays out a widely recognized formula for successful investing and portfolio diversification.  This widely accepted advice from finance expert and Princeton professor Burton Malkiel has withstood the test of time.

Why does investing time horizon matter so much?

The younger you are, the more you can risk in your investing to maximize rewards throughout your lifetime.  That said, if you know you’ll need access to your money pretty soon, to pay tuition or buy a car for example, keep it handy and keep it a safe short term investment or savings account.  But if you can invest money that you don’t plan to use much of until retirement, a retirement portfolio should reflect a pretty aggressive diversification strategy.