Life is journey marked by distinct stages, each presenting its own set of challenges & opportunities. Just as we evolve through these stages, so too must our approach to investing adapt to meet our changing needs & circumstances.

Investing your wealth is almost as important as saving (if not more, to some). Investments can help you grow your wealth at a pace higher than inflation, help you stay on top of your expenses, and grow your wealth. Investing is important at every stage of life, and each stage presents different opportunities and challenges. To ensure investor evolution and readiness at each stage, it is important to understand what investment life cycle stages are.

In this article, we will discuss the investment life cycle stages in detail, along with the different approaches that must be adopted considering dynamic circumstances and financial goals. In addition, we will also discuss some key pointers that all investors must consider before investing.

Also read: What is SEBI
 

Important considerations

The first question that must be answered before we even get to the investment life cycle stages is, what drives investments? It is generally accepted that factors like age and financial goals play a huge role in shaping your investment strategy. You might start investing from bachelorhood and continue throughout your life. However, your investment strategy will dynamically change several times.

Let us understand what are the driving forces behind investment life cycle stages:

• Income - It may come as no surprise to anyone, but income is the prime consideration for all investors. It is a cornerstone of a strategy and shapes one's financial needs.
• Expenses - With time, goals and priorities often change. This is directly reflected in your expenses and spending habits.
• Responsibility - While you may be a carefree bachelor now, there will come a time when you might become a parent. Your responsibilities also shape your priorities and investment goals.
• Age - This is also a vital part of determining your financial goals and investment strategies (such as the duration of investments).
• Market sentiment - The financial market is ever-changing and never without risk, adding another dimension to financial decision-making.

With a few of the crucial determinants of investments and investment life cycle stages clarified, let us now explore investing at different stages of life.

Also read: Sensex

This is the earliest stage of the investment life cycle, where you can start investing. Newfound financial independence and freedom are a gateway for many people to explore investments. At this stage, people may have high expenses on lavish experiences. However, it is important to be mindful and aim to save close to 30% of what you earn. It is from this corpus and savings that you can draw funds for investments. You can explore investments in small-cap or mid-cap funds targeting growth in the long run.

Investing when you have had kids brings about another change in your responsibility and strategy. A major change is that your expenses significantly increase. Even then, it is important to maintain a 30% savings rate and inculcate short-term goals as well in your investments. Overall, it is vital to categorise your investments and goals into short, medium, and long-term and modify your strategy accordingly.

Investment life cycle stages also consist of the last stage, retirement. Your financial state depends on how you have been investing so far. Perhaps the most important tip for individuals in the later years of life with little or no income and higher expenses is to focus on low-risk investments that provide stable income. What can be explored here are investment options like post office savings options and overnight funds to maintain a diversified portfolio.

By now it would be clear that even though investing is important at each stage of life, navigating this journey can be stressful and challenging. As you grow, it is important to maintain a proactive approach to investing. Be active and enthusiastic and make modifications if something is not working out. From the beginning of the investment life cycle stages, every investor should acknowledge and accept life-stage planning to craft unique and custom portfolios and plans that suit their needs and risk appetite. There is no one-size-fits-all in investing.

Also read: After-market orders

Investing at different life stages requires tailored strategies to ensure financial growth and security. During bachelorhood, focus on saving 30% of your income and investing in growth-oriented funds. As you transition to marriage without kids, increase your savings to 40%, balance stability and growth, and consider both partners' financial goals. Parenthood brings heightened expenses, so maintain a 30% savings rate and categorise investments into short-, medium-, and long-term goals. In retirement, shift to low-risk, stable income investments like post office savings and overnight funds. Throughout all investment life cycle stages, adapt your strategies to changing circumstances, prioritise proactive planning, and customise investments to align with individual needs and risk tolerance.