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Investing for the Ages

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Understanding investment strategies for different phases of life

Life is full of decisions. And that's certainly the case when it comes to something as important as investing. With all the recent uncertainty in the financial markets, more and more people are wondering if they're making the right investment decisions or if they should even be investing. While no one has a crystal ball to predict what will happen, history shows that investing has consistently been a successful tool to help achieve long-term goals.

So how exactly do you make those investment decisions? One simple way to do so is to consider your age. Your investment choices will vary considerably depending on where you are in your life. For example, if you're 22 years old and saving for retirement, you may be able to take on more aggressive investment options in exchange for higher potential returns, as opposed to someone at the age of 62 who is very near retirement and thinking about preservation of principal and income.

For younger investors.

If you're just starting your career, this is an excellent time for you to invest, as your retirement savings have decades to grow. Though you won't be at your highest level of income, you should set aside an amount of money to invest each pay period or month. If your employer lets you participate in a company-sponsored retirement plan, by all means, take advantage of it. The company may even match you up to a certain percentage. When you invest young, every little bit you save builds over time.

At this young stage of your life, your goals are typically more growth oriented since you have a long-term investment future. Preservation of principal and income is less of a concern until you're older.

For more established investors.

If you're in the middle of your career, say, in your 40s or so, you have a lot more to think about. You may have children to put through college, as well as plans for your retirement. At this point, you're likely earning much more money than when you started out, so this is the point of your life when you must stay focused on building your retirement balance. Try to contribute the maximum to retirement plans and invest in growth investments. One smart way to do so is to invest in mutual funds, which allow you to spread risk over several companies versus investing in individual stocks. If you started saving early on, you'll definitely be at an advantage, as your early savings have had time to build. If you're just starting to save, you'll need to catch up quickly and invest in more aggressive options.

For those nearing retirement.

If you're close to retiring, you'll want to make sure you don't have high-risk investments. You will, however, want to ensure that your investments can still produce returns that outperform inflation. With average life expectancies now reaching 75, you could spend a significant number of years in retirement, so you'll want to make sure you have enough money to generate an income stream that lets you have a lengthy, comfortable retirement and preserve some money to pass along to your heirs, if that's in your financial plan.

Investing is a process.

No matter where you are in life, it's important that you constantly review your portfolio to determine whether your investments are in line with your goals. Life is full of twists and turns, and we're here to help you prepare for the many years ahead.

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