Act your age to beat the market

A vicious fall in global stocks and the advent of high inflation are scaring savers of all ages. Lauren Almeida suggests the best assets for each generation to own

DIY investors face one of the toughest stock markets in more than a decade as global shares continue to sink and inflation grinds higher. Preserving, let alone growing, the value of your savings is becoming increasingly difficult.

But the severity of this “bear” market depends on how long you have to ride out the volatility and earn back, or grow, your money. This typically depends on age: for the young it can be an exciting opportunity if they are ready to take some risks. For young families, it becomes harder to strike the right balance between growth and risk. For those approaching retirement, mistakes can mean disaster.

Telegraph Money breaks down how each generation can fight off the bear.

18–30: YOUNG INVESTORS’ TIME TO BE BOLD

A falling stock market is positive news for young investors, who have decades left to make gains. Those who invest for the first time now will be able to buy cheaply. But only invest cash you don’t need within the next five years; if you plan to buy a property soon, keep your deposit money away from stocks.

Dale Scorer, of the wealth manager EQ Investors, said young investors’ long time frame opened up exciting growth themes in areas such as technology and renewable energy. She

‘Even when markets are falling, do not give up. Over the long term, the odds are in your favour’

recommended the Keystone Positive Change investment trust for young investors. “It invests in both listed and private companies, including innovative businesses solving environmental and social problems,” she said. The trust trades at a 14pc discount to the value of its assets.

She also recommended the Ninety One Global Environment fund, which invests in companies engaged in the transition to net zero.

31–55: INVESTING ALONGSIDE FAMILY LIFE

Investing for growth can be exciting, but as you age other demands on your money begin to grow. The costs of children, mortgages and weddings pile up and investors often decide they would prefer steady growth with some income to help them along the way.

Rob Morgan, of the wealth manager Charles Stanley, said that reducing “growth” investments and opting for a “passive” approach offered a manageable option. “Parents do not have much time on their hands,” he said. “A mainly passive portfolio keeps things simple. A core holding in a tracker such as Fidelity World Index is ideal.” The fund, which tracks the largest companies across the global market, charges just 0.12pc a year.

“Even when markets are falling, do not give up,” he added. “Over the long term, the odds are in your favour – global stocks will more than likely deliver positive returns. Try to ignore the short-term noise. However, even a global index fund will be dominated by growth and technology stocks.

“I would also recommend introducing some income to your portfolio, via a fund such as M&G Global Dividend. This will help diversify your investments, and receiving dividends can be a source of comfort when markets fall.”

56–60+: APPROACHING OR AT RETIREMENT

The bear market is most harmful for investors who are either nearing retirement or have already stopped working. Ian Howe, of the asset manager Janus Henderson, said investors around retirement age faced the added pressure of keeping up with inflation, which hit 9.4pc last month. “Those nearing retirement age are more concerned about the risks inflation poses, because their income will need to grow at least in line with prices if they want to maintain their standard of living,” he said.

Jason Hollands, of the broker Bestinvest, said investors in this age group should focus on defensive strategies during a bear market. He said funds such as Personal Assets, Ruffer Investment Company and RIT Capital Partners were designed to help investors preserve their wealth.

Investing for income can also help retirement pots keep in line with inflation. Mr Hollands highlighted the BlackRock UK Income fund, which yields 4.4pc and has fallen by 1pc since the start of the year. But he said diversifying sources of income across sectors and geographies was critical and highlighted the Guinness Global Equity Income fund. It yields a lower 2.3pc but has fallen by just 0.2pc so far this year.