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Is it too late to start investing?


Think investing for the long term is just for people in their 20s or 30s? Well, we’ve got some great news: no matter your age, you might benefit from investing.

Is it too late to start investing?

In fact, being a bit older can make some aspects of investing easier than they would’ve been when you were younger.

Here’s some things to think about if you’re looking at investing a little later in life.

You might have more money to invest

We know that everyone’s financial situation is different. But on average, people tend to make more money in their 40s and 50s than they did in their 20s. According to the Reserve Bank of Australia in March 2020, households of people between the age of 25 and 34 tend to earn an average of $120,000 per year. But households of people aged 45-54 make, on average, more than $150k per year! 

When you’re in your 40s, you’ve had 20 more years of building skills and getting qualifications in your job. You might also have more savings, or a successful business. So it isn’t a surprise that a 45-year-old will likely have more to spend each week than a 25-year-old! Of course this depends on a person’s lifestyle and whether they have increased expenses as well. 

If this sounds like you, this could have a couple of impacts on your investing journey. The first is that you have a bigger ‘pool’ of money to draw from to invest. The second is that you may not have to make as many tradeoffs to invest a larger amount as you would have when you were younger—again, due to the bigger ‘pool’. 

How short is your time horizon really?

Your time horizon is the period between when you invest your money and when you expect to need it. A short time horizon would be within the next 2-3 years, while a long time horizon would be over 10 years.

It’s easy to think that younger people have longer time horizons and older people have shorter time horizons. But the truth is (of course) more complicated than that.

If you’re 45, and you’re investing for your retirement at age 65, you still have 20 years to go! And if you intend on working longer than that, you have even more than 20 years. That’s a really long time horizon. You can put that time to work by exploring investment options that come with higher-risk, but might bring a higher gain—if this suits your risk appetite and circumstances of course! 

But you might not be investing for retirement—or, you might be a bit older than 45. Even so, you may be able to meet your investing goals just by investing for 5-10 years, depending on your circumstances. There are all kinds of investment options in between very low-risk savings, and higher-risk, high return investing—so it is important to consider which investment options meet your needs, lifestyle, and goals.

Typically, when a person is investing money that they intend on spending in a year’s time, they might look for something very low-risk. But when they’re investing money that isn’t intended to be spent for another 50 years, they might be willing to take on a lot more risk. A person might also want to spread their risk around. The stock market has a range of companies and funds available to invest in, across various levels of risk. This means a person could spread their money around different things that suit their specific time horizon. 

When looking at horizons and risks, a person whose time horizon is on the short side might invest in established companies that have historically been more stable, and paid steady dividends. If they have a longer time horizon, they might invest in a few different growth-oriented companies without a solid track record—but who intend on delivering high growth in the future. 

Remember that you can slice and dice your investments to meet your investment objectives and personal circumstances. This may be through tailoring your portfolio to your preferences by spreading your money across different levels of risk exposure.

Be kind to yourself

No matter how long your time horizon is, or what your income is, remember to be kind to yourself. It’s not uncommon for people in their 40s or 50s to wish they’d started investing 20 years ago. 

If you’re investing in things that suit your risk tolerance and time horizon, you could meet your investment objectives no matter your age, even if you have a shorter time horizon than a younger version of yourself.

Ok, now for the legal bit

Investing involves risk. You aren’t guaranteed to make money, and you might lose the money you start with. We don’t provide personalised advice or recommendations. Any information we provide is general only and current at the time written. You should consider seeking independent legal, financial, taxation or other advice when considering whether an investment is appropriate for your objectives, financial situation or needs.

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