Three Investment Tips for People Over 40


An investor over the age of 40 should have a different approach than an investor in their 20s or 30s. At this point, one should have an established career along with an adequate amount of savings. Of course, as an investor gets older he or she must protect their net worth. At the same time, one should take steps to add to their nest egg. Here are three investment tips for people over 40 years old.

Catch up: Most people do not have the foresight to save at a young age. Luckily, a person who has been in the workforce for more than a decade should have a solid income. With a decent income, an individual in their 40s can start to catch up on their retirement savings. Ideally, one should first take advantage of any tax-free retirement savings options offered by an employer. The most efficient way to save would be to take the company match for a 401(k). Then, an investor should fund their traditional or Roth IRA to the maximum allowed. After funding the IRA, an employee should then continue funding their 401(k). With this approach, one will realize the full potential of the employee match while, at the same time, take advantage of the benefits of an IRA. Since one can save $17,500 in a 401(k) and $5000 in IRA, an investor should have no problem building a sizeable retirement portfolio.

Growth: At this stage, one should still invest for growth. Someone in his or her 40s is, at minimum, 15 years away from retirement. When investing at this point, a future retiree can still take some risks. When choosing mutual funds or stocks, an investor should buy ones that offer solid growth. Of course, one should avoid purely speculative stocks since this usually does not pan out for the investor. Remember, one should not go conservative until they are less than five years away from retirement. When investing for growth, a person will, usually, achieve high single digit gains in his or her portfolio.

Independently: An investor, after saving money in their retirement accounts, should save independently. While this may be difficult at first, one should have no trouble putting away a few hundred dollars a month into a brokerage account. Luckily, most brokerage houses offer low-cost index funds where an individual can invest monthly. With this route, one can easily amass plenty of cash outside of their traditional accounts. Remember, once a person follows a plan for a few months, they will have no problem saving money outside of their traditional retirement accounts.

An individual in their 40s still has plenty of time to put money aside for retirement. To enjoy healthier returns, one should also realize that it is okay to buy stocks in companies that are growing. Remember, with solid growth stocks and a serious savings plan, an individual will enjoy large brokerage account balances.