Paula Luckhoff11 March 2025 | 19:57

Why you should usually NOT reduce the risk of your investments when you get older

Personal finance expert Warren Ingram shares invaluable investing tips on The Money Show.

Why you should usually NOT reduce the risk of your investments when you get older

Worry, concern, worried middle aged man looking at computer, 123rf.com

Conventional wisdom suggests we should reduce the risk of our investments as we get older.

In an uncertain world, it makes sense that the risk of losing money tempts us to be more cautious as we'll no longer be able to earn more money once we retire. 

But is this the best route?

Personal finance guru Warren Ingram explains why it's in fact a bad idea to reduce your risk in this scenario.

"My concern is that when you buy certainty with your investments, you could be doing that at an enormous cost."
Warren Ingram, Director - Galileo Capital
"While the temptation to have a bit less risk seems intuitively correct... unfortunately that uncertainty and potentially the volatility of investments, could be the very thing that gets us to a comfortable retirement."
Warren Ingram, Director - Galileo Capital

Ingram shares some insights that could open your mind to being risk-positive as you get older.

Understand risk vs volatility

  • People often confuse an investment's volatility with risk, believing an investment's more risky if it goes up and down like a rollercoaster. If an investment is stable and predictable, they believe it is less risky.
  • Money markets and fixed deposits are very stable and predictable. They provide certainty of returns. They also guarantee that your money will not grow faster than the cost of living increases.
  • If you choose stable and predictable investments, you're likely to guarantee that you'll be living a compromised life in your golden years.
  • RISK is the rising cost of living, and volatility is like the tide - not risky unless you're unprepared for it.

How old do you think you'll become

  • We are living longer. 
  • If you're going to retire at 65, it means your money might need to look after you for at least another 20-30 years.
  • Is volatility your biggest concern, or is the rising cost of living?

If you have more money, you can afford more volatility

  • It might seem counter-intuitive, but people who retire without enough money cannot afford to take more risk.
  • If you don't have enough, you need to be more cautious, not more aggressive.
  • If you have some excess money, you can afford more volatility.

You should have some money invested in overseas markets too

  • Studies show that the ideal range for a retired person ranges from 45%-75% invested overseas.
  • 75% is for people who have excess money.
  • 45% is for people who have just enough.

Time is your biggest ally

  • If you know you're in good health and expect to live a normal duration, you should consider time as your friend and not your enemy.
  • That means you should accept more volatility by having a larger portion of your investments in global assets and and in stock markets.
  •  These assets give you the best chance of growing your money faster than the cost of living.
  • In this case, stability and certainty are not your friends; they are the slow poisons that erode the buying power of your money.

Scroll up to the audio player to listen to Ingram's detailed advice