Are you familiar with investment life cycle strategy? Investment life cycle or also called as life cycle investing is a long-term strategy to reduce riskier investment as they approach the goal. In business, life cycle investing involves moving from riskier asset such as shares to less risky such as cash deposits or government bonds as the goal is getting closer. Life cycle investing offers a chance for personal or business to avoid big loss when the goal is close to being met.
Why is Investment Lifecycle Important?
Investment is about the duration of time. Investors most likely take risks in early investment or when they still young. Since they have more time ahead, they think they can make up for potential losses later. Meanwhile, when the goal of investment is getting close or they getting older, experience losses can give greater implications. This is the reason why shifting to less risky or safer options may help.
Retirement Life cycle Strategy
This strategy can be implemented to a range of goals, including business investment, retirement, and other saving plans. However, in recent years, life cycle strategy becomes a new popular approach in retirement investment. For example, you can choose to shift to lower-risked investment strategy as you approach age 65.
Lifecycle funds become the type of funds which the overall asset allocation adjust automatically to more conservative as retirement date getting approached. There are 2 types of lifecycle funds. First is target-date fund as you target certain year to retire, the asset allocation will adjust to that year. Second is target-risk funds that based on risk tolerance (conservative, aggressive, or moderate) need to change as getting closer to retirement.
Investment life cycle is beneficial to plan safer retirement. Instead of doing the planning manually, you can consult about your retirement investment with ADP Workforce Now Investment Life cycle to help you effectively reducing investment risk as your retirement time approach. You may ask for 401(k) plans that now mostly offer this strategy.