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Older investors are investing more of their savings in growth and technology investments, challenging conventional wisdom that people over 65 should avoid riskier assets.
According to data from investment platform Hargreaves Lansdown, funds such as Fundsmith Equity, Lindsell Train Global Equity and Rathbone Global Opportunities – actively managed, growth-focused funds – feature in the top 10 funds for Isas to buy for over-65s in the 2023-24 tax year. . , ranked first, second and seventh.
These funds did not feature at all in the previous tax year, when Legal and General Group, Aviva, Rio Tinto, Jupiter Asian Income – which focuses on high-yield Asian companies – and BAE Systems made up the top five.
As older investors approach retirement, their portfolio mix typically changes to reduce risk and ensure the preservation of their capital. This is traditionally achieved by focusing on high-quality government and corporate bonds, cash, gold and defensive stocks that pay reliable dividends.
But depending on the platform, this approach may not be enough to maintain a comfortable standard of living later in life, especially in light of the poor performance in recent years of safer investments such as UK bonds.
“As many of us are living much longer, there is an argument that without sufficient risk in a retirement portfolio, your investments will not support longevity requirements,” said Emma Wall, head of investment analysis and research at Hargreaves Lansdowne.
Also popular are Legal & General's US Index and International Trust Index – both of which feature heavily technology companies such as Microsoft, Apple and Nvidia – and were the ninth and 10th most popular buys in 2023-2024, according to Hargreaves Lansdowne.
On rival platform Interactive Investor, the same funds were the second and ninth most popular buys. Older investors have also gained exposure to technology through the Liontrust Global Technology Fund and Polar Capital Technology Trust.
According to Myron Jobson, chief personal finance analyst at Interactive Investor, most over-65s prefer major UK companies that pay dividends when choosing stocks, but “there is evidence of increasing adventurism in investment choices that reflect the prevailing investment themes of the time.” the present”.
“A lot of people are going to have to make sure their investment horizon is longer than it has been historically,” he said. “As such, people take more risks because of it.
“The technology has also made a comeback amid excitement about the potential of AI to transform various industries,” he said.
Older investors also favored more volatile emerging market funds, such as the Jupiter India Fund, on the back of strong economic growth in the country.
However, proving that older investors haven't completely abandoned safer, income-driven investing, there are two income funds in Hargreaves Lansdown's top 10 fund rankings: Artemis Income and BNY Mellon Global Income. Financial stocks such as Legal & General and Lloyds Banking Group, which offer attractive dividend yields of 8.18 per cent and 5.6 per cent respectively, are also included.
Whether an older investor looks to riskier assets may depend on the broader circumstances of retirement income. Those who have already committed to some form of income for one portion of their money may invest less conservatively with another portion, also for diversification reasons.
“Those with significant pension or property income may be willing to play a little faster with their investment portfolio,” said Laith Khalaf of AJ Bell.
“Others may simply take a more balanced approach to their investments rather than focusing on income alone, and it is of course possible to create artificial income from growth funds by cashing in stocks.”
While conservative stocks like Lloyds, GSK and Rolls-Royce are popular with AJ Bell's over-65 clients, darling chipmaker and AI maker Nvidia has been the fourth most popular buy of the year so far, after its share price rose 82% in… cent during this period. .
However, there are unique reasons why older investors tend to invest in less risky assets.
“People need to take into account the cost of health care as they get older,” Jobson said. “That's why so many over-65s have historically invested so much in income funds – so they can supplement their income in the event of health issues.”
