Currently, there are many types of investment, between new financial instruments such as digital currencies, and traditional ones such as currencies in stocks and bonds, so it is natural to ask, when, how and what to invest in.
Although it is always the best time to grow your capital, there are moments in life where different investments can be considered according to the profile and the specific objectives of each age.
Taking advantage of any opportunity to create investment strategies that allow profits is something vital in the financial environment, whether they are short-term or long-term investments.
Taking the above into account, in this article, we will mention some of the best investment options according to the age of each investor.
Main types of investment
Before talking about the types of investments that exist, we will start by defining what an investment is. An investment is considered when you pay for a good or financial asset, which will bring a profit in the future.
In short, an investment is when you put your money to work to generate profits. According to your investor profile and the types of assets you have, the investments that are convenient to make will be.
Therefore, one way to classify the types of investments that a person can make is:
- Financial investments: These are those whose goal is to obtain financial assets, they are not physical products and their value comes from a contract or agreement and not from their use, an investment fund for example.
- Physical or economic investments: These are those acquired through tangible assets, such as residential or investment land, a house, apartments for students and offices to rent to professionals or companies. Its value comes from the returns generated by its use or its subsequent sale, once its cost has increased. Some examples are the Certificates of the Treasury of the Federation (CETES) and cryptocurrencies, among others.
Among the main investments from the financial point of view are:
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Fixed Income Investments
Fixed income investments are common among people who want to start investing, but do not have extensive knowledge of the subject.
This type of investment is popular because the risk is minimal, although its main disadvantage is that the profit margin is also low.
Fixed-income financial assets are issued by both public and private financial institutions. They are called fixed income because the investor agrees to deposit a fixed amount of money for a set period of time in exchange for a return.
An additional benefit is that if the investor needs to withdraw their money early, they can resort to selling their title in the secondary market.
According to the validity period of these assets in the financial market, they can be classified as:
- Money Market: These are short-term securities, usually no more than 18 months.
- Capital markets: they are medium and long-term securities, which can range from 18 months to 30 years.
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Variable income investments
Unlike fixed-income assets, in variable income assets, the amount of profit that will be obtained in the operation is not known.
These types of investments usually have a higher risk factor, since, just as excellent returns can be obtained, it is also possible that the profits are null or, in the worst case, money is lost.
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Investment in the stock market
This type of investment is popular with novice investors, as well as being easily accessible from bank brokers.
This private organization offers the possibility of buying and selling shares of companies, where it is not necessary to be the owner to be able to invest.
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Investment in currencies
Investments in currencies are usually made in the International Foreign Exchange Market, also known as the Forex Market (Foreign Exchange Market).
This consists of buying and selling two currencies simultaneously, that is, buying the currency that is expected to increase in value and selling the one that is expected to decrease. For this to be carried out successfully, it is necessary to be aware of market movements.
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Investment in raw materials
As its name indicates, it is about making investments in raw materials, whose list is very extensive and is considered for advanced investors. Among the main ones we can mention:
- Energy (oil)
- industrial metals
- Precious metals
- Farm products
- Perishables
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Investment in real estate
As we mentioned in several of the articles in this blog, real estate investments are one of the safest you can make, in addition to generating profits and increasing your capital, they have extra benefits that make them ideal to invest at any age.
As is known, investments in real estate are safe because real estate is one of the few assets that increases in value over time, especially if the property is located in an area of high capital gains.
In addition to this, you can obtain extra income with your property after buying it, for example, we have prepared an article with 7 business ideas to earn money with a piece of land that will be of interest to you.
The return on investment of a real estate investment can be calculated in advance, guaranteeing a safe operation. Also, buying an investment lot is one of the best options for retirement.
A real estate property not only gives you profits, it is also the ideal opportunity to start building your wealth, regardless of whether you are still young or close to retirement.
What type of investment to choose according to age?
The general image that the investor has is that of an entrepreneur with several businesses and a lot of experience, however, just as there are several types of investments, there are also different types of investors and these can vary depending on factors such as age, capital, investment objectives, among others.
Now that you know the main types of investment, we have grouped them into 4 ranges according to age and profiles, as well as some investment advice to make better decisions and identify the best investment, whether financial or physical.
- Investments between 25 and 35 years
- Investments between 35 and 45 years
- Investments between 45 and 55 years
- Investments between 55 and over
Investments between 25 and 35 years
Between 25 and 35 years old is considered the best stage to start investing, the younger you are, the less financial commitments have been made. Therefore, it is time to create or increase capital.
In the case of financial investments, young people are the ideal clients of variable income assets, where profits are delivered as dividends or through the purchase and sale of said assets, however, if profits are not generated or the price of assets decreases, there is still economic independence.
Some examples of variable income financial investments are shares, such as those of companies listed on the stock exchange or mutual funds, where investors share a common heritage made up of values that may vary according to the market.
In the case of physical or economic investments, it is the perfect age to invest in investment land, since it is not urgent that the returns be reflected and yes, it is the stage of laying the foundations for the future.
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Investments between 35 and 45 years
Those who have started a family or a business in the previous stage begin to approach investments in a much more conservative tone than the younger ones, since the new economic responsibilities require more cash flow than before.
In this period of life, although income increases, expenses have also increased, so it is advisable to diversify investments.
It is advisable to balance the capital employed between those of fixed income assets, such as a property that can be leased to third parties, and a variable such as some participation in the shares of a newly created company or cryptocurrencies.
The differences between one and the other are: that fixed income refers to assets that produce a fixed return —usually in the long term— without it increasing or decreasing despite the passage of time, while variable income corresponds to assets that can grow in value quickly but can lose value just as quickly, so they may not be very stable.
At this stage it is important —if you do not already have one— to set up a retirement savings plan in which you can deposit part of the income earned from your investments.
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Investments between 45 and 55 years
The priorities have changed in the period of life, the children are already growing up, the expenses have increased, and it is best that most of the investments be directed towards fixed income assets, whose returns are preparing the retirement stage.
It is not necessary to stop investing in variable income assets, but it is necessary to do so by planning how much you can risk, in case you do not have other investments to amortize a possible fall in currencies.
Purchasing medical expense insurance or investment insurance for retirement at this stage is an excellent idea, to prevent any unforeseen event that could put the capital formed at risk.
For some people at this stage, the purchase of real estate is a way to ensure an income at the time of being an older adult, since they have savings that, when invested in said acquisition, do not completely decapitalize them.
Unlike other types of land, in commercial land, you can earn money without investing more, so in the following years, it will represent extra income for retirement.
Investments between 55 years and over
This is a stage to enjoy the returns generated from investments made in previous stages of life, however, if you have not invested before, this is the ideal time to take advantage of the capital acquired over the years.
Physical investments such as commercial land have many benefits, because they become ideal fixed-income assets for this moment, obtaining a permanent income derived from their use or rent.
If you still want to invest part of your capital in equity investments, it is best to opt for investments in historically safe currencies, which, although they have a lower return than other riskier ones, remain stable in the long term.
Precious metals such as gold have shown their stability, especially in times of economic crisis, when world banks go to their reserves, however, if you do not know this type of instrument well, you will have to pay an advisor to carry out the investment management, which would raise their cost.
Rule of 120 to know how much to invest
The general recommendation of the experts is that the younger you are, the higher the percentage of income that can be invested inequities, and the older you are, the higher the percentage allocated to fixed income.
This recommendation is also known as the rule of 120, with the aim of obtaining an estimate of the risk that is run at each age with the savings.
Rule 120 mentions that in a said amount the capital —or savings— is subtracted from the completed years, and the result is the percentage that can be invested in variable income financial assets, which will decrease as age increases.
Investing in real estate is a financial success at any stage of life
After reading the investment recommendations according to your age, you will have noticed that they all have in common the investment of goods in the real estate sector, due to its stability and protection against inflation.
To obtain the highest return on your investment —even without being an expert— you should take advantage of the opportunity to acquire properties in privileged locations when the opportunity arises, especially if they are pre-sale, as they are cheaper and there is a higher profit margin.
Due to its investment potential, a Mexican southeast is an excellent option. It is a destination that in recent years has positioned itself among the favorites for the establishment of large companies that bring with them a proliferation of businesses and urban development around them.
At BMF Inversions we help you find the ideal investment project for you, in the best cities in the Mexican southeast such as Cancún, Mérida, and Playa del Carmen, with great profitability, perfect for your profile and needs.