How to tailor your investment portfolio to suit your age

Take calculated risks in your youth and ensure a stable income in retirement

Time invested is the number one determinant for success in the markets, so the earlier you start, the better. Getty Images

Recently, I’ve been reviewing my 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 calculated risks in your youth to ensuring a stable income in retirement, let’s explore how to tailor your investment strategy to different life stages.

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. That’s the reality.

During this decade, you will probably learn this lesson the hard way; I did.

After building an emergency fund of six months’ expenses, a simple sample portfolio for someone like this might be heavily weighted towards exchange-traded funds 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 start-ups balanced with some traditional larger companies that provide stability.

For example, investing in tech companies 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.

Primetime investing (ages 31-50)

As you move into your 30s and 40s, financial responsibilities typically increase. Many are managing family costs, buying homes, and saving for children’s education, which underscores the need for a stable yet growing financial base.

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 a key conversation you need to have with yourself. If you decide on a more balanced approach, your portfolio might now include 60 per cent 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 per cent, could be balanced between high-risk products and conservative investments.

A larger investment in real estate, physical properties, and yield-based products like bonds, sukuk, and term deposits can also be added to the mix.

In my case, 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. But these are critical years, so don’t take them for granted.

Nearing retirement (ages 51-65)

Approaching retirement, the focus generally shifts towards preserving capital and preparing for a steady income in retirement.

Reducing exposure to volatile stocks, risky assets and increasing investment in yield-bearing products might be something to look into.

Shifting towards utility stocks like Dubai Electricity and Water Authority, 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 per cent equity exposure are quite common.

You don’t want significant sell-offs 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.

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. While this might not be a typical portfolio for someone my age, it’s what my risk appetite has determined.

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 sukuk, 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, along with maintaining a small portion in equities to hedge against inflation.

What will you do with your money in retirement? That’s on you. As for me, I plan on spending it!

Muhammad Rasoul is chief executive of neo-broker amana