Age-Based Investment Strategies: Avoid Repeating the Same Mistakes Across Generations

Investing has become increasingly popular among all age groups, from young adults to those approaching retirement. However, behind this positive trend lies a recurring pattern of mistakes made by each generation. From being overly aggressive in youth to becoming excessively cautious near retirement, these missteps can significantly affect long-term financial plans.

According to a report by CNBC Indonesia, many investors—both beginners and experienced—fail to align their investment portfolios with their age group and risk profile.

Common Investment Mistakes by Age Group

In Your 20s: Too Aggressive, Neglecting an Emergency Fund
Young investors often jump straight into the stock market or cryptocurrency in hopes of gaining instant profits. Unfortunately, many of them have not yet built an emergency fund as a financial foundation. In fact, Indonesia’s Financial Services Authority (OJK) recommends preparing an emergency fund equivalent to 3 to 6 months of monthly expenses before starting to invest.

In Your 30s: Lack of Asset Diversification
During their most productive years, many professionals rely on a single type of asset—such as stocks or property—without considering diversification. Yet, diversification is a key strategy to reduce investment risks. According to Bareksa, it is advisable to spread investments across multiple instruments such as mutual funds, gold, and bonds to ensure both safety and optimal growth.

In Your 40s to 50s: Starting Late, Being Too Conservative
Most people only begin investing as they near retirement and tend to choose conservative instruments like time deposits or low-risk bonds. As a result, the returns generated are often insufficient to meet retirement needs. Ideally, investing should start early to take full advantage of the long-term effects of compounding.

Recommended Investment Strategies by Age

To prevent repeating similar mistakes, here are investment strategy guidelines tailored to each life stage:

• In Your 20s: Focus on building an emergency fund first, then start investing small amounts in money market mutual funds and large-cap (blue chip) stocks.

• In Your 30s: Diversify your portfolio across various sectors. Consider using robo-advisor services to help determine optimal asset allocation based on your risk profile.

• In Your 40s to 50s: Combine conservative assets like bonds and gold with a small portion of growth assets such as dividend stocks. Strengthen your retirement savings to ensure financial stability in later life.

Investment Simulation by Age Group

Here is a sample investment allocation simulation, based on a monthly income of Rp7,000,000 and an average annual return of 10% over a five-year period:

Note: Estimates are based on the assumption of a 10% average annual return.