Later in life, capital preservation is a crucial investment consideration, but is it possible to accomplish this without sacrificing growth?
It's possible that you will be retired by the time you are in your seventies, or at the very least, you will be carefully considering it. Does reaching your 70s, however, require you to alter your approach to investing or give it up completely?
When managing your investments in your 70s, there are a few crucial factors to take into account, even though it is never too late.
"Don't ever feel like you've been aged out of investing, even though your working life may be coming to an end. Your investing runway still has decades to run," stated Darius McDermott, managing director at broker Chelsea Financial Services. "Diversification and capital preservation are more important than ever when your portfolio is your source of income."
It can be wise to modify your investment strategy in order to potentially lower the risk.
Watch the entire video here: When stock market shocks cause a short-term decline in an investor's portfolio, younger investors have decades to recover their investments. However, if you're in your 70s, you might not have that luxury because a significant decline in the value of your portfolio could negatively impact your retirement plans.
Thus, one of the most crucial factors to take into account when investing in your 70s is risk management.
You can reduce your risks in a number of ways without compromising your ability to grow your capital.
Investing in bonds or stocks in your 70s?
Regardless of age, a crucial choice for any investor is how much to put into fixed income (bonds) or equity (stocks and shares).
Older investors typically hold a larger percentage of their portfolio in bonds because they are generally thought to be safer than stocks. Some people allocate a portion of their portfolio to riskier assets, like stocks, and the remainder to safer assets, like bonds, after deducting their age from 100.
For instance, you might invest 75% of your assets in bonds if you are 75.
This implies that while the majority of your portfolio is reasonably protected in the event of a stock market crash, a quarter of it is still exposed to the potential rewards of stock market gains.
However, because bonds are not completely risk-free, this strategy is not infallible. In recent years, there has also been a relatively close correlation between the bond and equity markets, which means that both could crash simultaneously.
Therefore, it might make sense to think of that 75 percent as a bucket to allocate to less risky assets in a broad sense rather than allocating it solely to bonds. Cash, wealth preservation funds, commodities, and some defensive stocks are examples of this. A few of the best savings accounts pay up to 5%. Money market funds, on the other hand, are a well-liked investment strategy because they provide a low-risk alternative to cash with the potential for a higher return.
However, it may not be a good idea to play it too safe due to the effects of inflation. According to Chelsea Financial Servicess McDermott, "it would be foolish to bet your entire retirement income on them staying that way, as inflation stays elevated, the cost of keeping your hard-earned savings in cash only grows, and while interest rates look attractive today."
In your seventies, should you buy defensive stocks?
In your 70s, you don't have to give up on stocks completely, but it is wise to think carefully about the types of stocks and shares you are purchasing.
Generally speaking, you should focus on either income stocks, value stocks, or defensive sectors (there is some overlap between all three).
Defensive areas.
Defensive industries typically do about as well during recessions as they do during expansionary times. Three good examples are consumer staples, healthcare, and utilities: stocks in these industries typically hold up well during a downturn because people don't spend much less on shampoo, medicine, or their water bill when the economy is doing poorly than when it is doing well.
Because infrastructure companies typically have fairly predictable income streams that can increase in tandem with inflation, infrastructure stocks can also play a defensive role in portfolios.
"An infrastructure fund is a good satellite option," McDermott stated. "First Sentier Global Listed Infrastructure diversifies away from conventional bonds and dividends by adding inflation-linked income from real assets like utilities and toll roads."
Earnings stocks.
The income you earn from your investments is crucial if you're getting close to or have already reached retirement because it may make up the majority of your spending money.
Income can play a crucial role in increasing the value of your portfolio in addition to providing for your retirement.
Income stocks may be better than bonds due to the possibility of dividend growth, according to James Lowen, co-portfolio manager of J O Hambro UK Equity Income.
"The amount that a bond pays its holder in interest is flat; they don't grow in fixed income coupons," he stated. On the other hand, dividends in the equity market typically increase, which mitigates the effect of inflation reducing the returns on fixed income investments.
"When deciding between fixed income and stocks, it's important to understand that one is flat in nominal terms, while the other grows," Lowen stated.
Value-based stocks.
If you're investing in your 70s (or, arguably, at any age), it's crucial to pay attention to the price of the stocks you're purchasing.
"Your starting valuation has a big determinant of what you ultimately make when you buy a stock," Lowen stated.
Purchasing stocks that are trading at high multiples of their fundamentals may expose you to greater losses in the event that market confidence declines.
Conversely, purchasing stocks at lower valuations may provide more room for gains and some protection against losses on the downside.
"Wheres your upside if you pay a full price" asks Lowen. Purchasing value stocks "creates your upside optionality and protects your downside."
Are commodities able to safeguard your wealth when you're seventy?
When you're in your seventies, commodities can protect your investments by providing some diversification from stocks. Bonds and stocks can develop a correlation, but this isn't always the case for some commodities. For instance, the price of agricultural commodities is frequently more influenced by the weather than by the business cycle.
"Commodities are cyclical and volatile, tracking economic growth closely" overall, according to McDermott.
For instance, due to the fact that both the stock market and gold prices have become particularly sensitive to interest rate expectations, there has been a greater correlation between gold and stocks this year.
According to McDermott, "higher real yields also make gold less appealing, especially for anyone relying on portfolio income, since gold pays none."
In the meantime, demand for industrial metals like copper and silver tends to increase during periods of increased economic activity because both metals have significant industrial applications.
Which funds might be wise investments when you're seventy?
J O Hambros Lowen stated, "You have to know what their track record is on income growth when you're choosing funds." Investing in UK stocks, his fund has the potential to increase income over time; in 2026, it is expected to yield 4.15 percent. Over the 21 years since its founding, it has grown its dividend at a compound annual growth rate of 9%, which means that, based on the initial unit price, it would have yielded 29% in 2025.
Another option is the City of London Investment Trust (LON:CTY), which has the longest record of annual dividend increases of any investment trust, having increased its dividend annually for 59 years running.
McDermott emphasized Capital Gearing Trust (LON:CGT), an investment trust with a strong emphasis on capital preservation that has produced a positive return in 42 of the previous 44 years while striving to never lose money.
"Absolute return funds are another option worth considering, using both long and short positions across companies to smooth returns and cushion against market falls," McDermott stated. Here, we have SVS RM Defensive Capital and Janus Henderson Absolute Return."
Additionally, multi-asset funds can provide exposure to multiple asset classes in a single holding. McDermott identifies Jupiter Merlin Income Portfolio and Orbis Global Cautious as lower-volatility choices.
Additionally, McDermott suggests adding bondswhich he refers to as "the traditional ballast of any portfolio"such as TwentyFour Dynamic Bond or Artemis Global High Yield Bond, which offer higher yields.
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