Investing for beginners: How to invest according to your age – from age 20 to retirement

Pensions: Make My Money Matter promote ethical investing

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With less than a month to go until the tax year ends, many will need to be taking action sooner rather than later if they want to use up their 2020/21 allowances. This includes the annual £20,000 ISA allowance, which will reset for the new tax year on April 6, 2021.

As April 5 nears, investors are being warned there are only weeks to go if they want to make the most of this year’s allowance.

However, with investments, it’s very important to note that capital is at risk.

For those who decide investing is the right choice for them, there are lots of considerations to make.

The reason for the investment will play a role in how a person invests, and it seems age group can have an impact too.

Laith Khalaf, financial analyst at investment platform AJ Bell, recently spoke to on the topic.

He shared his top tips for beginner investors at three different stages of life.


“Money might be tight for younger millennials, but they shouldn’t be put off saving relatively small amounts into the market because they do have one resource in spades- time,” commented Mr Khalaf.

“£1,000 invested by a 30 year old would be worth £5,700 at age 60, with six percent annual growth.

“A 50 year old would need to invest £3,200 to achieve the same outcome, because they have so much less time for their money to grow.

“The long investment horizon of younger investors means they do have time to rise the ups and downs of the stock market, so they should seek to invest mainly in shares, and indeed, perhaps look to areas like emerging markets and smaller companies, which come with higher volatility, but also the potential for significantly better long term returns too.

“If you’re new to investing you might consider investing via low cost tracker funds, which simply follow a given market rather than trying to beat it.

“As your knowledge and experience grows you can then supplement this approach with actively managed funds.

“As ever it makes sense to protect your savings from tax by investing within a pension or ISA.”

Mid-life – 40 and 50s

“In your 40s and 50s you’ve still got a fair amount of time until you need to draw on your money, so you should probably still be investing mainly in equities,” the financial analyst said.

“However, the older you get, and the nearer to drawing on your investments, you might consider to add some more conservative multi-asset funds, which invest in a mix of shares, bonds, cash, property and commodities to give a bit of protection from steep market falls.

“You might also give some thought to switching some of your portfolio to income producing assets, ready for your retirement.

“Playing catch up with your pension savings might be a good idea at this point, as you will probably be at your peak earnings level, and therefore more likely to benefit from higher rate tax relief on contributions.

“If you’re a higher rate taxpayer, each £800 you put into a pension gets bumped up to £1,000 by the government paying basic rate tax relief, and you then get a further £200 back in higher rate relief, so for £1,000 in your pension, you actually only end up paying £600 in this scenario.”


“Once you hit retirement the name of the game is income,” Mr Khalaf said.

“So you need to invest in assets which produce dividends and interest payments which you can live on, alongside other sources of income.

“The difficulty is that cash savings right now won’t provide you much income, and bonds likewise have seen their yields depressed by Quantitative Easing, so shares are one of the few sources of income retirees can look to.

“The capital and income provided from shares is variable though, so there is definitely risk attached which older investors need to recognise.

“But many younger retirees will still have many years ahead of them; a 65 year old can on average look forward to living until they’re in their late 80s, so they still have time to pursue growth too.

“But perhaps they might combine equities with other assets, again using a multi-asset fund which reduces their risk and also provides them with an income.”

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