To make a crude analogy, investments strategies are like fingerprints everyone’s is unique. When an individual decides to craft a portfolio they need to devise an investment strategy that meets their individual circumstances. They must factor in their age, the amount of money that they will be able to invest, the amount of time that they will be able to devote to their investing and their ultimate goal.

Most investment advisors believe that younger investors should choose investments that have a good probability for capital appreciation. The reasoning being that younger investors have plenty of time to recoup losses, and if their portfolio outperforms expectation they will be able to retire early. Those same advisors will tell middle and older-aged investors to look into conservative, income producing investments. Their reasoning is that the consequences of a bear market or bad investments when approaching retirement could be disastrous, leaving an investor with little time to recoup their losses.

I believe that younger investors should take measured investing risk. History tells us that over the long term, the odds are against more secure investments such as savings accounts, money market accounts and Treasury bills, outperforming stocks and bonds. The Ibbotson yearbook shows that from 1926 through 2010 treasury bills had an annualized return of 3.7% versus 5.3% for intermediate term government bonds and 9.8% for stocks. While there are few guarantees in investing we know that young investors that take prudent investment risk are likely to have more money when they retire than those who invested only in totally secure investments.

Young investors that do not have a lot of time to manage a portfolio may want to consider high growth exchange traded funds (ETF). An ETF is a security that tracks a basket of stocks but trades like a security on the major exchanges.

investing strategyFor young investors that have the time to track stocks, its probably a good idea to buy a couple winning stocks that are reasonably priced and have the potential for growth. By crafting a small stock portfolio with three stocks or fewer, it is easy to understand what each company is doing and to track the performance of those stocks. This of course does not provide you with sufficient diversification and should not be your core holding. Younger investors should keep in mind that they are never locked into an investment strategy and should make changes if they find that other strategies are a better fit for their circumstances.

Mature Investors

The most common investment advice for mature investors is to create a low risk portfolio that is heavily weighted towards bonds annuities or income producing stocks. I agree with that assessment but with a caveat. When risk management techniques are taken to extremes, they can introduce new risk. I believe that an investment strategy that is extremely conservative can be just as dangerous as an overly aggressive investment strategy.

Investors that are near retirement or in the early years of their retirement need to consider that they or their spouse may have to depend on their retirement funds for 25 or more years. If that is the case, inflation even at a relatively low rate can eat away at the purchasing power of their funds over time.  For example, “$50,000 today would be worth only $30,477 in 25 years, even with a relatively low (2%) inflation rate.”

Perhaps the best investment strategy for mature investors is to craft a portfolio with stocks, bonds, annuities and short term investments, or some mix of these asset types. The ultimate goal of such a portfolio would be to diversify risk and provide the potential for capital appreciation. Below are some of the most common investments that mature investors use to secure their retirement.


A popular investment tool for investors that are approaching retirement are conservative dividend paying stocks. Stocks that fit these criteria are “Dividend Aristocrats”. Dividend aristocrats are top flight dividend stocks that have raised their dividends for at least 20 consecutive years. In 2012, dividend aristocrats had an average total return of 15.3%, versus 14.3% for the blue-chip stocks in the S&P 500. Dividend aristocrats offer investors the security that comes from investing in stable and secure companies along with a steady income flow and the potential for capital appreciation. This is not meant to be an endorsement but the top performing dividend aristocrats for 2012 was: [See: Dividend Aristocrats and Dividend Aristocrats Canadian Edition]

Cincinnati Financial Corporation (CINF). In 2012, this stock had a total return of 34% and its yield is 3.8%.

One of the top dividend aristocrat ETF’s in 2012 was:

iShares 1000Value Index Fund (IWD). The fund’s inception date was May 21, 2000. Its year to date return is 17.46%, and its yield is 2.3%.


Bonds are a debt instrument through which a corporate or government entity can borrow funds for a defined period of time at a fixed rateof interest. Some mature investors are attracted to bonds because they are confident that they will get back their capital, plus fixed interest payments from the bond issuer. One of the most popular bond types for mature investors are Treasury Inflation-Protected Securities, or TIPS. “The principal of a TIPS increases with inflation and decreases with deflation, as measured by the Consumer Price Index.” A TIPS protects investors from the ravages of inflation. [See: Bond Investing Strategies]


Another popular investment choice for mature investors to consider is annuities. Annuities are low risk investments that can provide a retirement income for a fixed period usually life.

There are two types of annuities fixed and variable. A fixed annuity is an insurance contract in which the insurer makes fixed payments to the annuitant for the term of the contract. A variable annuity is an insurance contract in which at the end of an accumulation period the insurer guarantees a minimum payment. With a variable annuity, there can be payments in excess of the minimum depending on the performance of the portfolio. Annuities can be funded with a one-time payment or with periodic payments. Also, annuities can be set up to provide immediate payments, or payments that will begin at a preset future date. Mature investors gravitate to annuities because they provide security for those who want to have a guaranteed source of income after retirement.


Some investors manage investment risk by buying “Put” option contracts.  These contracts give an investor the right to sell shares of a stock at a predetermined price within a given period of time. An option contract is similar to an insurance contract in that it limits your losses. If shares don’t lose value you only lose the cost of the option. [See: Simple Options Strategies For All Investors]


When deciding on an investment strategy individuals need to evaluate a lot of factors. This article was intended to make the decision easier by laying out widely used investment strategies (and the reasons for them) for both young investors and mature investors. Investing in the stocks, ETF’s, bonds and options is inherently risky, and prospective investors should do further research before investing.

Darnell Brown

Darnell Brown

Darnell Brown is an accountant with over 20 years of auditing experience. He has worked in both the private sector and for the United States Government. He currently works as a freelance writer and has written numerous financial articles for the website.