When Should You Slow Your Investing Strategy?

Wall Street has been a hot topic lately, especially with the release of The Wolf of Wall Street in theaters on Christmas Day. The good news is that while that movie had some factual basis it was still just that – a movie. The rest of us need to continue living normal, non-violent lives while we assess and reassess our investment strategies.
When Aggressive Investing is Key
So what exactly should we be doing? It depends on where you are in terms of your life and your overall goals. Those who are younger and who are planning for an early retirement, or a normal retirement, are often encouraged to be a bit riskier about investing than those who are closer to retirement. You would, traditionally, shift to lower-risk options as you age. By the time you hit retirement, you would have a balanced portfolio to live off of.
That philosophy has changed, though. Social Security isn’t what it was a few decades ago. Pension plans are almost nonexistent. Inflation is very real. Medical advancements mean we’re living longer. Most of us hope to retire early. This mean you’re going to have to spend a lot more time planning for your future, which means maintaining more aggressive investment strategies, or at least a nice balance of aggressive and conservative investments, for a longer period of time.
When to Slow Down
So when should you slow down? Talk to your investment broker about the exact time to slow down your aggressive strategies. If you are within a few years of retirement and have built a nice portfolio, you should consider becoming more conservative. Younger investors can bounce back from major turns in the market, while older investors won’t have a chance to recover and may be left wondering what funds they’ll have to live on in the coming years.
So here’s the general rule of thumb. If you plan on needing the money within 5 years, you should no longer be investing or leaving your money tied up in accounts. That doesn’t mean you need to stop investing completely. It means you should consider switching to lower risk portfolios. Depending on a bull run – which would be profitable – is a little too risky for you to deal with if the market were to crash. For example, in 2008, there was a shift of more than 5,500 points in the DOW. That translates to a 42% loss in value. That’s huge if you’re near retirement age.
Long story short, do your homework. If you’re young, read some bulls on wall street reviews and take a couple of classes so you can better understand the market. Aggressive investing is ok, to a point. You just need to learn when (and how) to back off.