Question

Which kind of portfolio would a financial adviser recommend to an older investor who is close to retirement? diverse and conservative diverse and aggressive uniform and conservative uniform and aggressive

Answer 1

A financial adviser would recommend a diverse and conservative portfolio for an older investor near retirement, emphasizing capital preservation and steady income. This contrasts with the more aggressive growth-oriented strategies suitable for younger investors, who can tolerate more risk due to a longer time horizon.

Step-by-step explanation:

Investment Strategies for Different Age Groups

A financial adviser would likely recommend a diverse and conservative portfolio to an older investor who is close to retirement. This is because the primary goal for someone in this stage of life is to preserve capital and ensure a steady stream of income to fund retirement expenses. A diverse portfolio spreads out risk by investing in a variety of asset classes, such as stocks, bonds, and possibly other vehicles like annuities or real estate investments, mitigating the impact of any single asset's poor performance.

On the other hand, the investment strategy of a 30-year-old might be significantly more aggressive, with a focus on capital growth. Younger investors typically have a longer time horizon which allows them to recover from the short-term volatility of riskier investments like stocks. They can afford to take on more risk for the potential of higher returns over time, as they have more time to ride out market fluctuations.

Diversification is essential, as it has the potential to smooth out the extremes in value changes over time. While diversified savings and investing portfolios do not guarantee economic success, they are a standard recommendation because they reduce the risk associated with putting all your investment in a single company or asset class, which could be affected by adverse events.

Answer 2

A financial adviser would recommend a diverse and conservative portfolio to an older investor close to retirement, emphasizing capital preservation over high returns. Diversification is crucial to minimize risks. Investment strategies vary significantly with age, as younger investors can afford to be more aggressive while older investors need to focus on safeguarding their savings.

Step-by-step explanation:

A financial adviser would most likely recommend a diverse and conservative portfolio to an older investor who is close to retirement. A diversified portfolio is one that includes a variety of investment types, such as stocks, bonds, and other asset classes, to minimize risk. For a person nearing retirement, capital preservation is usually more important than high returns because they have a shorter time horizon to recover from potential losses.

The importance of diversification is underlined by the fact that it helps to mitigate the risk associated with any single investment. It stems from the wisdom of not putting all your eggs in one basket. Diversification can cancel out the extremes in the value of investments, which is very important for someone who needs to rely on their savings soon.

The investment strategy of a 30-year-old is typically more aggressive than that of a 65-year-old, largely because a younger investor has a longer time horizon to withstand market volatility and can therefore take on greater risks with the potential for higher returns. Conversely, an older investor nearing retirement would prioritize stability and security over higher returns due to the increased importance of safeguarding their current assets.