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As a long-term investor, I tend to think that investors do themselves a favor if they start buying stocks early rather than later in life.
So are there any ages beyond that that I don’t think are still worth bothering with?
Making the most of the opportunity available
I do not think so. For example, a person who has not even a penny for 50 they can still build up a large retirement pot by the time they reach the retirement age of 67 (they would rise to 68, although life expectancy has fallen compared to before the pandemic).
Such a person would do well to consider how to make the most of their remaining investment time.
For example, imagine they make a large annual contribution to their Stocks and Dividends ISA, which is £20k.
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On top of that they say they put £1k a month into a Self-Invested Personal Pension (SIPP). That will increase, due to tax relief, to £1,250 (for a basic taxpayer; higher and additional rate taxpayers can get more tax relief).
So in a year, the investor would be putting £35k into stocks and shares. Doing that from 50 to 67 would allow £595k to be invested.
Trying to use the stock market to your advantage
But that amount has not yet been invested in the stock market. If you just put money into a Cash ISA instead, for example, £20k a year can add up in the same way. Also, it may earn bank interest at very little risk, if any.
The idea, instead, would be to start buying stocks to hold over time, in the hope that there might be some capital gains and dividends. There may not be, of course: stocks can lose value and rise and returns are uncertain.
But even at age 50, the retirement timeline is long enough that a diversified portfolio of carefully selected stocks should have enough time to weather various conditions in the stock market – hopefully including good ones.
It means that the total amount invested grows by 7% per year (we call this compounding). Starting at 50 with nothing and investing as I explained above, the retirement pot should be worth around £1,079,408 by the time I’m 67.
So would it be a good idea to start buying stocks at 50? I can say so!
Choosing the right share is important
None of us have a crystal ball, but the key to this approach is buying and holding high quality stocks.
One that I think investors should consider FTSE 100 property manager IM&G LSE: MNG paid a dividend of 6.6 %.
The company aims to increase its dividend each year. It has been doing so in recent years, although there is no guarantee that it will be able to sustain that in the long run.
The company operates in a market with high customer demand. I expect that to remain the case. And its strong brand, large customer base and deep financial markets expertise are all competitive advantages.
I think its international footprint helps, although it also adds complexity and cost.
Another risk is that a market crash could see policyholders withdraw funds, hurting earnings. But from a long-term perspective, I like the company’s prospects.
