Is it too late to start investing at 50?  

A common phrase we have all heard in our lives is that it is never too late. And I realised the true meaning of it a few weeks back when I was attending my uncle’s 57th birthday party. 

As he blew the candles and announced his retirement plans, he shared a secret with the family. The most financially negligent man (as my parents would describe him) turned around his life and financial status. 

His secret? He finally stepped into the world of investment at the age of 51! Read along to see what his secret recipe is clubbed with some of my suggestions and ideas for you to start investing in your 50s and have an excellent investment portfolio in your golden age.

A caveat

The first step of learning how to invest in your 50s is to unlearn the perceptions and prejudices you have.

Investing in this golden age is not just about stock trading. It has more to it like insurance, retirement savings etc. The important factor here is to look at investment from a bird’s eye view. 

Investing in your 50s means making sound financial decisions to lead a happy and worry-free life post-retirement.

Where to begin?

The primary question you need to ask yourself before you start this journey is how much money you believe you will require for an easy-peasy life after you retire. For this, you can make an estimate from your current expenses and earnings, subject to inflation.

• Buy stocks

Though many conservatives will tell you that it is too late to start investing in the stock market in your 50s , I suggest otherwise. If you are planning to work for another decade or 2, then you should be able to handle some ups and downs of the market. 

There is no reason for you to stay away from this lucrative investment opportunity. Your 50s are the peak of your career and income and this should allow you to take a little more risk than the usual belief.

The catch here is to look for the quality stocks which have long-term potential. Invest in stocks where you believe you can stay invested for in the long run.

• Diversify…diversify…diversify

This is a bit of advice we give to all raw and ripe investors alike. The importance of diversification grows with your age. This is because even though you should invest in stocks, your portfolio must be safe from any sudden plummets in the market. 

There is no better example than the COVID-19 pandemic to explain sudden plunges in stock markets.

Investing in your 50s calls for you to put your money in different kinds of stocks, varying by type, size, age and business of the companies, consider looking beyond stocks and explore opportunities like SIPs, Mutual Funds and other low-risk options too.

• Save for retirement and don’t touch these savings for investment

Like I mentioned before, investing at the age of 50 is not just about putting money in investment instruments. At this stage of your life, you need to have a cushion to support you in case anything goes wrong with your investments.

No matter how much you diversify, there is always a certain risk involved with any kind of investment and a wise investor will always have her savings figured out before expanding her portfolio.

As your savings will build up you will probably be tempted to invest this money to double the amounts. In such a case, I advise you to consider low-risk options like provident funds and fixed deposits. They have low returns but you will not lose sight of your savings. 

• Avoid taking on new debt

As you hit the 50 years mark, it is recommended to not take up any new loans that can add to your financial burdens. Loans can hamper with your investment plans and even hamper with your savings.

• Insure your health

It is no news that as you move up the age ladder health risks. Even the healthiest of the people cannot run away from the perils of age. Consequently, a big part of investing in your 50s is to insure your health to avoid overhead expenses on hospitals and medical bills.

• Cut down on spending:

As you enter the new decade of life, it is better to cut down unnecessary spending and save more. This will get you ready for a life post-retirement. 

There is no need to rush through it and cut down your expenses drastically. Rather, take small steps that will gradually change your expense curve. For starters, you can review your memberships and subscriptions and see which of those have become redundant.

Conclusion

As you can see, it is not too late to start investing in your 50s. Infact, it is important that you make sound financial decisions at this age. 

The most important thing to remember about investing at this stage of your life is to have clear goals in mind. Take time to assess your financial situation and your future self will thank you for your efforts. It is indeed never too late!

Frequently asked questions

1. How much money should you have in your 50s?

• It is recommended to have savings, almost 6 times of your salary in your 50s. To reach this huge number, you must start saving from an early age and put savings in a high interest savings account.

2. Where is the safest place to put your retirement money?

• Although no investment can be 100% safe, putting savings in bank accounts  and government bonds is considered to be the safest option to put retirement savings.

3. What percentage of your money should you invest?

• It is recommended to invest between 10 to 15% of your total annual income. This number ensures that you have a diverse portfolio and you can take up risks as you have the remaining income for essentials.

4. How do I start saving at the age of 50?

• If you are only starting to save now, it is recommended to save at least 30% of your annual income to retire with ease and comfort.

5. What is the purpose of diversification?

• Diversification is an investing tactic to reduce risk on investments by spreading them across different financial instruments and industries. This technique allows you to maximise your returns as each category of investment reacts differently to any given situation.