Question

Investing over the Life cycle: Including studying the effects of the investor’s life cycle on their goals, orientation, and strategies.

how?

Answer 1

Every investor life cycle follows a glide path.

At the young age when an investor starts investing say at the age of 25 - 35 - The spending is more as one is at growth stage lot of capital expenditure happens at this phase like marriage, buying a new house, education, buying a new car at this point of time the investor can take maximum risk, as a result, the portfolio of the investor in this age should consist of maximum equity and less debt say 80% equity allocation and 20% debt allocation

Between the age of 35-50 Investor reach at stable phase, his earnings become stable cash flows start to increase but he has to spend on his child education + children's marriage for this one needs to save. at this stage also the investor can take the risk because he will have stable cash inflows as a result so at this stage the allocation of the portfolio should be 65% equity and 35% debt.

The age between 50+ is the age where the investor will be willing to take very less amount of risk as one will be retiring in a very small duration in time so for this, their allocation should be 80% Debt and 20% equity.

This is how investors' life cycle affects its investing.