How to Invest for Your Stage of the Investor Life Cycle

29 May 2018 | Back to Blog

People come in all different shapes and sizes, and so do our investment profiles. When it comes to our finances, each person has a unique set of wants and needs that determines our ideas about what we want to do with our money and when we want to do it. We also have revenue streams, like our job, that As a result, a good investment strategy is one that will get us to our goals in the desired time, taking into account our age and our current earning ability. Fortunately there is a wide range of options out there, available from financial institutions like VM Wealth Management, that allow us to invest appropriately for the stage we’re at in the investor life cycle.

Our life cycle as investors can be divided into three phases: accumulation, consolidation and spending.


The accumulation phase is typified by young adults – many are recent graduates of a tertiary institution – saving or investing funds to take care of their immediate consumption needs like a car, furniture and a home. Although they often have a small portfolio, Accumulators also have great potential for earning in the years ahead through job promotions and salary increases. Because they have a relatively long time horizon, they have time to recover from any short term fluctuations in the real value of their investment portfolio. This means they can assume more risk to take advantage of investments opportunities with more attractive returns.

For instance, a young person with the majority of their portfolio invested in stocks on the stock market has time to recover if the stock market should receive a shock resulting in a crash that reduces the value of their portfolio. If you’re an Accumulator, some options you might want to think about include equities, mutual funds and other relatively risky investments, since they usually provide high returns, especially over the long term. With a long time horizon, you can also take advantage of tax-free products which tend to require a long-term commitment.


Consolidators are people who have typically been working for at least 20 years, their incomes tend to be high and their net worth (the assets owned exceed the amount owed in loans) is usually growing rapidly. They have already acquired certain assets to ensure they’re living a comfortable lifestyle, such as a car and one or more homes. Consolidators can still accept moderate risk but your primary goal should be planning for retirement. Products best suited to people in this category can include deferred annuities, medium- to long-term bonds (for principal protection, ie. protection of the amount originally invested), equities and real estate (for principal growth).


People in the spending phase are retirees who tend to be less tolerant of risk as their main source of income no longer exists, but who need to ensure they have sufficient funds to carry them through the remainder of their lives. Those in this category might want to look at equity securities with a steady dividend payout policy if the investment portfolio is substantial enough to provide a sufficient income stream. Otherwise, you would be better served by sticking to safer investments where your principal is preserved. Bonds, other fixed income securities and savings accounts at JDIC-insured institutions should be your preferred savings methods.

Implementing Your investment Strategy

As you can see, the question is not whether you should invest, but how much and in which products, given the variety. There are several facilities available to help you maintain the discipline of consistent investment. Salary deductions are one such example where you ‘set it and forget it’, but remember to invest only in products you fully understand.

Diversification is essential to reducing the risk of your portfolio, so invest in different products, with different institutions and in different countries. By diversifying across financial institutions, you’ll be able to take advantage of a wider range of products, while reducing the risk of loss in the event that any one institution runs into financial difficulty.  Within institutions you can diversify between products targeting particular goals.

Finally, don’t feel restricted to investing within your home country. Diversification across countries has the benefit of spreading your risk exposure geographically. It also exposes you to more active and efficient markets and an even wider range of investment products, some of which may not be available at home.

Start now!

If you haven’t started already, start putting away small amounts each month. It will build up over time, no matter how small the amount. The key is to start saving and investing right away. Even if you can’t currently afford your ideal amount, you can increase it over time. Talk with a Wealth Advisor and develop your plan to suit your goals, your risk preference and your particular set of circumstances. Remember, every step, no matter how small, brings you closer to achieving your financial goals.