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The Best Investment Strategies for Each Generation

By Michael Flannelly · June 28, 2022 · 5 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

The Best Investment Strategies for Each Generation

The global economy and financial markets have changed dramatically during the past decades. Each generation has faced unique financial circumstances, including a Wall Street boom in the 80s, robust economic growth in the 90s, the Great Recession, and the Covid-19 fallout. So it’s not surprising that different generations could have widely different money habits and views on investing.

That doesn’t even include the differing needs for someone in their 70s and enjoying retirement compared to someone who has just graduated from high school. Given these vastly different experiences and ages, there are various investment strategies best suited for each generation that may help them meet financial goals.

Strategies for Baby Boomers

Baby boomers – those born between 1946 and 1964 – are likely finished or almost done paying off their homes and in the middle of or looking toward retirement. That means their financial goals are changing. Baby boomers must learn how to budget their expenses without regular labor income while still planning to spend for travel, health care, and other things.

A 2020 survey by Charles Schwab found that baby boomers had saved $920,400 in retirement savings, and 82% believed their savings will get them “all the way” or “most of the way” to living out their dream retirement.

Still, a 2022 study by Fidelity found the average couple will need $315,000 in medical expenses in retirement, excluding long-term care, representing a potential gap in their savings plan.

Here are some investing strategies baby boomers can use to save for retirement:

Strategy 1: Keep Cash on Hand

It’s crucial to still stash away a few bucks for unexpected expenses, such as health care costs. Health care has continually been one of the largest expenses in retirement. So keep squirreling away a little bit of your remaining income into an emergency fund.

Strategy 2: Stay Invested Until Retirement

Like all age demographics, baby boomers should still live by the idea that they’re in it for the long haul. Get and stay invested in the market via a 401(k), IRA, or other investment account, and do not touch these accounts before retirement age — which is 64 in the U.S., on average.

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Strategy 3: Continue to Diversify

Baby boomers should continue to diversify their portfolios as they near retirement. However, experts generally recommend shifting your portfolio’s asset allocation at this stage in life, moving toward a conservative investment strategy focused on fixed-income securities and blue-chip stocks.

And once you retire, it doesn’t mean it’s time to pull all your money out of the markets and live with the cash on hand. There are several investment options for retirees, including a portfolio of income-producing assets like bonds and dividend-paying stocks.

💡 Recommended: 5 Investment Tips for Retirees

Strategies for Gen Xers

Meanwhile, Generation X – or those born between 1965 and 1980 – feel much less rosy about their financial future. A 2021 report by Bank of America found that 94% of Gen Xers said they feel stress when thinking about their financial situation

It could have to do with their place in life. Unlike boomers, Gen Xers may still face student debt and mortgage payments. Additionally, this generation faces more hurdles, like child caregiving and employment challenges. With all this financial stress, here are some investing tips for Gen Xers:

Strategy 1: Consider Your Financial Goals

To help build a savings nest egg, many Gen Xers use what is known as managed portfolios of investments, which are personalized and tailored investments made for the specific needs of the individual account holder.

And this targeted approach may be crucial for this middle-of-the-road age demographic as they are finally earning more. However, Gen Xers also need to save for retirement and college for their children and pay off mortgages on their recently purchased homes.

Strategy 2: Get Financial Advice

For Gen Xers, who haven’t done much in terms of investing, it’s never too late to start. Seeking help from financial advisors and other professionals can help you set short-term and long-term financial goals.

Strategy 3: Take on Some Risk

For professionals in their 40s, their money likely has another 20-plus years in the market before retirement. They still have time to make up for any potential losses, so it may not hurt to put a little on the line in exchange for a bigger win down the road. So, Gen Xers can still factor some risk into their portfolio’s asset allocations, including investing more heavily in stocks and other risky securities. However, it’s best never to risk more money than you can afford to lose.

Investment Strategies for Millennials and Gen Z

Millennials – those born between 1981 and 1996 – lived through the severe economic downturn of the Great Recession and faced some of the highest unemployment rates in history. So, it’s no wonder they have felt trepidation toward the market.

Additionally, millennials and Generation Z – those born after 1997 – had to endure the economic and financial turmoil caused by Covid-19. A 2022 study by Fidelity said that 55% of people between 18 and 35 (those belonging to Gen Z and a younger cohort of millennials) put their retirement planning on hold during the pandemic. As a result, 39% of this age group expect to retire later than originally planned.

Here are some investing tips to get millennials and Gen Zers on the path toward saving for the future:

Strategy 1: Start Investing Early

As the youngest set, millennials and Gen Zers have the most to gain by investing early and staying in the game. After all, they will likely have the most time in the market. Because millennials and Gen Zers will have more time to save, they can weather the ups and downs of the markets and take advantage of compound interest.

💡 Recommended: A Beginner’s Guide to Investing in Your 20s

If you are employed, the easiest way to dip your toe in the market is to get involved in your company’s 401(k) savings account as soon as possible. This way, you’ll automatically send a percentage of your paycheck directly into your savings. And if your company has a 401k matching program, you’ll be earning essentially free money.

Strategy 2: Explore Diversification

A great way young people can diversify their portfolios is by investing in the market via mutual funds or exchange-traded funds (ETFs). Mutual funds are portfolios that gather money from investors and then make investments, typically in stocks or bonds. ETFs are similar in that they’re baskets of securities, but ETFs are listed on public markets and can be traded all day.

These are low-cost and diversified ways to invest in a portfolio of stocks and bonds. It’s easy to do this via a robo-advisor that does all the heavy lifting for you.

Strategy 3: Pay Off Debt

Millennials have an average student loan debt of $38,877, while Gen Zers have an average debt of $17,338. The need to pay off this debt contributes to a delay in investing and saving for the future. But it’s still critical to keep on your payments to keep this burden from hanging over your head for too long.

However, just because people of these generations have student loan debt doesn’t mean they can start investing now. A little bit of investing goes a long way, so putting just a little bit in the markets now can pay off in the long run.

The Takeaway

Different generations face different investment challenges, but by and large, important rules to follow include paying off debt as quickly as possible and saving and investing early.

SoFi Invest® is an all-in-one platform for an individual’s investment needs. With SoFi online investing, you can trade company stocks, ETFs, or fractional shares with no commissions for as little as $5. Additionally, those who want help building a portfolio can use SoFi Automated Investing with no SoFi management fee.

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