Every financial advisor is aware about the importance of asset allocation. However, it is also vital to understand that investments have to be done keeping your client’s age in mind. Listed below are some key guidelines to help advisors build the right portfolio for their clients according to their age
Clients in the age group of 20-30 years
Individuals between 20-30 years are generally single and having just begun their careers, they don’t have a lot of liabilities. Financial advisors can explain to such clients that they can afford to take risks during this period since they have fewer responsibilities. A major portion of their investments should include stocks and bonds subsequently.
Clients between 30-50 years
This is the age where one has to manage family expenses and take up responsibilities. During this time, the risk appetite is not as high. Nonetheless, investors need funds for their children’s education and future. For these clients, financial experts must develop a portfolio which consists of higher proportions of bonds, mutual funds and lesser percentage of stocks. Advisors should also encourage clients to increase their SIP amounts to build a corpus for their kids.
Clients in the 50-60 age group
Investors between 50-60 years are close to retirement and have grown up children. This is a vital period where they have to save funds to lead a comfortable life after they retire. As an advisor, you must tell clients that they cannot afford to put their money in risky investments. For clients in this age group, the ideal allocation should be higher investments in bonds, mutual funds, real estate and lower in stocks.
Clients above 60 years
Retired individuals need a sense of security. Hence, their main objective is to make sure that they gain sufficient returns from their investments to take care of their daily requirements. Financial advisors have to ensure that their clients who are in the retirement phase invest in vehicles which have low risk and offer decent returns i.e. larger percentage of bonds and mutual funds followed by safe equities and real estate.
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