From First Paycheck to Full Pension
Investing isn’t one-size-fits-all.
Recently, I’ve been reviewing my own investment portfolio and reflecting on how being in my 50s has influenced my investment approach. Age is, after all, a crucial factor when managing your investments.
From taking bold risks in your youth to ensuring a stable income in retirement, let’s explore how to tailor your investment strategy to different life stages. As the saying goes, with age comes wisdom — and, hopefully, wiser investments!
The Starter Portfolio (Ages 20–30)
In your 20s, time is on your side, but you need to get started. Time invested is the number one determinant for success in the markets, so take advantage of this period. The earlier you start, the better. It’s an ideal time for high-growth investments with higher risk, setting up your emergency fund, and learning to live your best life, all while saving and investing for the future. You can afford to take more risks now because, even if you make some bad choices (and you will), you still have plenty of time to recover and build your wealth.
People in this age group are often trying to figure things out. They are focused on career advancement and financial independence, providing them the freedom to explore, gain experience, change course, and learn tough lessons about managing risks in life and their financial worlds. There will be plenty of temptations to find paths to quick riches. Courses on how to become a successful day trader overnight, the latest stock, crypto asset, or investment fund that can’t lose and will yield you 15% a month — all of it is too good to be true. That’s the reality. During this decade, you will probably learn this lesson the hard way; I did.
After building an emergency fund of 6 months’ expenses, a simple sample portfolio for someone like this might be heavily weighted towards ETFs and stocks. Keep it diversified and focus on areas where you have above-average understanding or can gain expertise. This might include emerging technologies and startups balanced with some traditional larger companies that provide stability. For example, investing in tech giants like Tesla or companies on the cutting edge of today’s technology boom, like Nvidia, might make sense. Riskier or more volatile assets, such as cryptocurrencies like Bitcoin or Ethereum, can also represent a small but potentially rewarding portion of the portfolio. However, you should be prepared to lose any funds allocated to high-risk assets like crypto.
Here’s an example of a portfolio:
Prime Time Investing: Balancing Growth and Security (Ages 31–50)
As you move into your 30s and 40s, financial responsibilities typically increase and many are managing family costs, buying homes, and saving for children’s education, which underscores the need for a stable yet growing financial base. This means that your risk tolerance is now likely shifting. Not for everyone naturally, but you really need to think about what your goals are and what type of risks you can stomach.
It would not be uncommon for a person in this age group to keep the same asset allocations they had in their 20s. This is really a key conversation you need to have with yourself or your life partner. If you decide on a more balanced approach during this period, your portfolio might now include 60% stocks, such as blue-chip companies like Apple and Aramco, while keeping growth in mind with ETFs like QQQ.
The rest of your portfolio, about 40%, could be balanced between high-risk products and conservative investments. As you approach 50, it might be prudent to keep high-risk and speculative investments below 10%. A larger investment in real estate, physical properties, and yield-based products like bonds, sukuks, and term deposits can make up the rest of the 40% if you’re not keen on higher-risk speculative assets.
Here’s an example of a portfolio:
In my case, I wasted and lost a lot of money in my 30s. I was earning like crazy and spending like crazy. I didn’t see an exotic sports car I didn’t like, a high-end watch whose sparkle didn’t catch my eye, and dozens of sneakers that didn’t bring me back to the 80s hip hop scene of my youth. I joke with my kids now (all five of them) that if I hadn’t mismanaged my 30s, I would most likely be spending most of my time reading philosophy and history books and annoying them like crazy. These are critical years; don’t take them for granted, thinking you are going to live forever.
Nearing Retirement (Ages 51–65)
Approaching retirement, the focus generally shifts towards preserving capital, taking one last run at growth, and preparing for a steady income in retirement. People’s life goals here are often about ensuring a comfortable retirement, managing health care needs, and possibly helping adult children financially, all while safeguarding assets.
Reducing exposure to volatile stocks or risky assets and increasing investment in yield bearing products might be something to look into. For instance, shifting towards utility stocks like DEWA, which offer more stability and regular dividends, and more substantial holdings in sukuks, municipal bonds or treasury securities, could be a good way to protect your wealth from market fluctuations.
After all, no one can predict exactly when the market will decline or when the world economy will enter a major recession, so portfolios with no more than 50% equity exposure are quite common. You don’t want significant selloffs in the equities markets to push your retirement out a decade just before you hit 65, so actively managing the equity part of your portfolio is critical.
Here’s an example of a portfolio:
Of course, all of the above approaches are what I would recommend on a general basis, without knowing the specifics of anyone’s individual circumstances and, most importantly, risk tolerance. In my own investments, as I write this, I have about half of my portfolio in an actively managed selection of technology stocks. I believe technology is expanding faster than ever, especially in areas like AI and chip manufacturing, and this will be highly promising over the next decade. Consequently, and in full disclosure, my portfolio is riskier than most my age. I also have about 5% of my net worth in digital assets for the same reason. This money, however, I have discounted and assume I could lose. It makes it easier to weather those crypto winters.
Investing Wisely in Retirement (Ages 65+)
Once retired, ensuring that your savings last is paramount. Investments should be conservative, with a focus on income generation and capital preservation. High-grade sukuks, corporate bonds, government securities, and dividend aristocrats like Procter & Gamble or Emaar, which have a long history of stable dividend payments, are advisable. High yielding term deposits depending on the interest rate environment might also be an option for guaranteed income, along with maintaining a small portion in equities to hedge against inflation.
Here’s an example of a portfolio:
Your investment strategy should evolve as you progress through different stages of life. Regularly reviewing and adjusting your portfolio to align with your current age, financial goals, and risk tolerance ensures that your investments continue to meet your needs effectively. What you plan now will not be what happens, accept that, and stay on top of your investments and financial data throughout each year.
What you do with your money in retirement? That’s on you. As for me, I plan on spending it! No large trust fund for my kids — instead, I’ll spend on my grandkids’ education, travel, and maybe even one of those now-classic sports cars I wasted my money on in my 30s all over again.
Muhammad Rasoul, CEO of amana
