With input from Banor’s Luca Riboldi, La Stampa analyses how approaches to investment change from one age group to another.
Young people starting out, the over-50s, and pensioners. Age-appropriate investment.
If you’re thirty-something, international shares are your best bet; later on, CD and bonds are safer.
By Sandro Riccio
An investment plan for every age group. The goals aren’t the same for 30-somethings, the over-50s and seniors aged 70 or over. Disposal income changes, and so too does the amount available for investment. Modulating the variables at play is not easy. We asked a number of experts the best road to follow, with an eye to age and to which risks it’s best to avoid. And we asked them to suggest the strongest bets for each generation.
30-somethings and the strength of the long-term
A lack of job security and, maybe, long periods when it’s hard to make ends meet. That’s the most common image of the 30-something age group. So much effort to find a steady job, and so little scope to put some money aside to invest. And yet it’s the young who should be putting the most thought into this issue. Our uncertain pensions system and the many unknowns as to the future are questions that loom large. Putting something aside today could help young people face a more serene future. And the effort needn’t be that great, not least because the young can count on a long lifespan ahead of them, with many decades for even small amounts invested to bear fruit. What’s more, they can afford the luxury of taking a few risks.
“Our advice is to build up a 2-part investment portfolio”, says Daniele Piccolo, Deputy General Manager of Banca Albertini Syz. “The first should only contain savings to be set aside, untouched, over the very long term. Right up to retirement”. This part should contain a significant amount of shares – global with dividends. One road to follow could be investment funds or ETF. “It’s important for these funds not to invest in speculative firms but in companies offering a constant flow of coupons”, explains Piccolo. Such investments will see two-figure growth over the years, especially if coupons are regularly re-invested in the fund.
The second part of the portfolio should contain the savings put aside to buy a car, one day, or a house. So, investments that are easily liquidated. One solution might be short-term bonds or deposit accounts.
Over-50s, and a steady income
The over-50s are perhaps the group that can build up their investment most fully. However, there’s less time available for your day-to-day savings to bear fruit. The risk needs to be reduced, so the portfolio must be more structured, with a view to preserving capital and obtaining an overall annual return of 2.5%.
“To achieve this, I’d place 25% of the portfolio in shares”, says Luca Riboldi, chief investment officer at Banor. “The rest should be divided among credit certificates, which are the safest, and quality short-term corporate bonds”. Italy should account for 7% of the shares, with the rest distributed amongst China, the USA and Japan, as well as the emerging economies.
At 70, you can still have an investment outlook of over 10 years. But what’s the best way to use your money over 2 decades?
“The idea is to focus much more on bonds and less on share-related risk”, says Riboldi. “Not least because shares have already had a good run and so it’s best not to be exposed to unpleasant surprises”. So nearly half of the portfolio, 45%, should be made up of 2-year credit certificates, with a yield of 0.7% to 0.8%. The rate is low, but so is the risk. Another 30% of the savings should be placed in investment grade – i.e. high quality – corporate bonds. From the euro-zone, and with a duration of around 3 years. Good names to back are Finmeccanica, Prismian, Luxottica, L’Oreal and Nestlé.
Another 10% of the portfolio should be placed in corporate bonds, again of high quality, but in dollars, so as to gain from the appreciation of that currency. And the remaining 15% should be invested in shares, divided between Italy (4%) and the USA (3%), with the rest in the emerging markets and China.
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Original article in Italian language, available here: La Stampa, September 29, 2014.
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