Investing later in life
Tan Jee Yee 

THE rule, according to most investors, is to start early. Investing from young helps make the best out of your money.

As compound interest builds over time, the earlier one starts, the more money he stands to earn.

Having more time before retirement also allows for higher risk-taking, and possibly even getting a better head start in life.

Edward Goh Seng Ho wishes someone had told him 20 years ago to invest early.

Fast approaching 50, Goh has never made a single investment. It’s not that he isn’t prudent with his money – he saves consistently, doesn’t gamble and doesn’t spend beyond his and his family’s means.

And, he’s almost close to paying off his housing loan.

Yet, perhaps he may have been too prudent with his money.

“People tell me I could easily afford to invest in another house, or possibly invest in stocks or maybe start a business.

“But my parents taught me to always keep money saved up and not be tempted to grow it outside of work. I’ve always kept it in the form of savings,” he tells FocusM.

Facing the prospect of retirement and getting increasingly concerned with inflation and the country’s economic condition, Goh is starting to feel that his savings may not be enough for him and his wife.

“I felt like I should’ve taken some of my savings to invest, but now, I wonder if I’ll be starting too late,” he laments.

Would those aged between 40 and 50 be past investing age? While the “start young” rule should be adhered to, there’s nothing preventing one from making investment headways later in life.

“The rule about investments is that it’s never too late to do so,” says Calculus Financial Solutions’ financial advisor David Gobinathan.

The rule about investments is that it’s never too late to do so, says Gobinathan

“What changes here is just how you invest. The way you invest changes with age. While you may not have the compounding interest and head start as other people, starting to invest later can still benefit you during retirement,” he says.


Best time to invest

Gobinathan says while starting to invest when young is encouraged, it doesn’t mean everybody should do so during their early working years.

“Each person should consider his financial position first before investing.

“It doesn’t matter what age. If you’re not in the right financial situation to invest, then you shouldn’t.

“Say you’re 30 years old. You are neck-deep in car loans, credit card bills and student loans. You’re living pay cheque to pay cheque with only a little left at the end of the month to save, and you have no emergency funds.

“Even if you’re expected to start early, you still shouldn’t be investing in that situation,” he says.

Essentially, investing may be a priority, but there are financial steps that one needs to take first, regardless of age.

“Most important is to have a fully stocked emergency fund in an accessible savings account.

“You will want to have three to six months’ worth of living expenses tucked away before considering investment as viable,” Gobinathan says.

The person also shouldn’t have any high-interest debt.

“If you have a debt that has a higher interest rate than your investment returns, you end up losing money each day you carry the debt.

“It works in your favour to complete payment of the high-interest debt before starting to invest,” he says.

In Goh’s case, he still has a decade to work. His only daughter is already in the workforce and he has prepared enough emergency and retirement funds. So he’s more than ready to start investing.

In fact, Gobinathan says Goh’s age could be seen as one of the prime times to advance one’s investment and financial portfolio.

“Your 20s and 30s are often volatile times in adulthood. A lot of things change, and you often take on more responsibilities and commitments.

“Once you hit your 40s, things should be relatively more smooth-sailing. Your life is more stable and your salary will be higher. Statistics show that most people reach their peak salary in their mid-40s and 50s,” he says.

Once you hit your 50s, you’re not only at or near the peak of your earnings, but most of your major living costs have declined or ceased entirely.

“At 50, you’re likely to have already paid off your housing loan. Even the cost of raising children dwindles as they get older. So, rightfully, middle age gives you more leeway to invest,” he stresses.


Higher risks

In some ways, Gobinathan feels that starting to invest in one’s 40s and 50s isn’t much different from starting in the 30s, though age does factor in some of the decisions that are made.

“In your 40s, you still have a long time before your retirement, so you can take a bit more risk and allocate more funds towards this. Upon reaching 50 and above, one might feel more comfortable to play it safe,” he says.

On the whole, Gobinathan feels taking some risk is worthwhile. “Remember, you’re likely to have less financial commitments and your salary is at its peak.

“By taking a bit more risk, you can probably grow your portfolio fast enough to supplement your retirement funds when the time comes,” he says.

Meanwhile, GL Advisory financial planner Ho Huan Foong believes that once anyone breaches 50, the kind of investments made should be safer.

“If possible, it’s best if people don’t dip into their retirement funds to invest. Closer to your retirement age, you need to store up as much as possible and avoid losing too much,” she says.

Ho feels people who begin to think about investments and growing their savings later in life may feel the urge to hasten things, leading to unnecessary risk-taking.

“I notice this in a lot of people approaching retirement. They worry about their savings and start believing in shortcuts to earn money.

“This is why older people are susceptible to multilevel marketing schemes and scams,” she says.

Both Gobinathan and Ho say that even if you start later, investments are still a long-term strategy.

“You shouldn’t look for the quickest way to double your money. That’s gambling.

“Investments take time, and you’re really just building the foundations for financial stability during your retirement years. The concept doesn’t change even if you started out later,” Ho says.

If one is investing later in their life, it might be prudent to seek professional help and opinions.

“It’s the safest thing to do. Investment is complex, tricky and overwhelming to newcomers, so there’s no harm in seeking professional help before getting started.

“Advisers and planners can help you understand your financial situation better and advise you on where to go next,” Ho says.

Gobinathan reiterates his point that there’s no real difference in what you invest in during your 40s and 50s.

“Real estate, the stock market, mutual funds, REITs … they are all viable options. Depending on your earnings and savings, you may even want to branch into angel investments and others that are not correlated to stock markets,” he says.

The key here, as with investments made at any age, is to have a diverse portfolio.

In fact, Gobinathan feels that because one has more stability in middle age, the asset mix can be more diverse.

“Diversification can help reduce the risk of you loosing too much of your allocated investment funds.

“However, it can be overwhelming to diversify into different markets and asset classes, which is why it is better to have professional help,” he says.


Never too late

Ho, on the other hand, believes that late investors could start safer and smaller.

“I’d put my money into REITs, unit trust and commodities like gold, just to test the risk appetite and get the hang of investments.”

For those willing to take larger risks, Ho recommends buying property and looking into stock trading, preferably with blue chips.

While the investment type is inherently not too different, Gobinathan believes the more important aspect is to understand that as you get older, your investment strategy will have to change.

“When you approach your retirement age and eventually enter it, you need to shift strategies and start focusing less on accumulating funds, and more on maintaining it,” he says.

Essentially, he says one will want to start reducing risk by shifting investments away from stocks and other assets and into cash and fixed-income solutions. Even if you started investing late, once you start entering your retirement days, it’s more important to keep your savings and move your investments to safer options.

Ultimately, investing at a later age isn’t much different. What’s more important is knowing that it’s never too late to do so.

Making riskier investment late in life

GL Advisory financial planner Ho Huan Foong is more concerned about the mindset of the person who plans to start investing later in life.

“When you start late, you might feel the need to grow your funds quickly. This may lead to making riskier decisions,” she says.

Falling for investment scams is one thing. But Ho is equally worried about those that turn towards investments they don’t understand or have yet to become stable.

Ho says as you put your income into investments, you may not have the extra money to spend on luxuries anymore.

This includes cryptocurrency like Bitcoin and Ethereum, equity crowdfunding and peer-to-peer lending.

Ho stresses that people getting ready to invest need to start preparing for changes in their financial life, too.

A big part of investments is to allocate your income properly. This is something Ho says people need to account for as they embark on their investment life.

The financial planner says most people in their 40s and 50s, having reached their peak salaries and having paid up most of their long-term loans, may indulge in some overspending.

“People at that age may see a sudden increase in their disposable incomes. Suddenly they feel they can afford to go on more vacations, dine in more expensive places and buy new cars,” says Ho.

And while there’s no harm in rewarding oneself after decades of hard work, she says once people decide to use that money to invest, they need to make lifestyle changes to ensure they don’t overspend while redirecting funds to their investments.

“As you put your income into investments, you may not have the extra money to spend on luxuries anymore.

“You really need to prepare for changes. Like allocating funds for savings, you need to set aside money that counts as expenditure, and others which you plan to use for investment,” she says.

You shouldn’t be too worried, though. Ho says it’s all behavioural, and once someone picks up the habit of analysing their monthly income and correctly allocating it, it will become second nature.

“Before you start investing in your middle age, you must understand your finances and expenditures. That’s how you know how much to allocate and which investments to go for,” she advises.

In fact, the mindset to constantly reassess one’s finances and investments must persist even after the investor feels comfortable.

“As you approach retirement, you need to constantly scrutinise your financial decisions. Managing finances is not easy, but it is also not impossible.

“When you throw investments into the mix, things may become more complicated. It’s good to be prepared.” The mindset change should also include not taking on new debts.

Ho recommends putting everything down in spreadsheets to get a solid picture of one’s financial situation. Or, at best, approach a financial planner for help.

“It’s not as simple as just picking something to invest in. You will need to make changes to your financial life,” she says.

This article first appeared in Focus Malaysia Issue 259.