Bad Economy Investment Tips by Age

A lot of people these days have been watching their stock portfolios and 401(k)s shrink, a result of the current economic crisis. Many of us would like to do something about it, but the question is what we should do. Individuals' investors responses to the current crisis will naturally vary with the age of the person and how exposed he or she is to today's financial markets.

For people who are in their 20s, they are most likely to have just recently gotten started investing in stocks, bonds, and mutual funds. These people are not likely to have lost as much money as others who have been investing for much longer. While this may provide little comfort for a 25-year-old whose 401(k) is shrinking, the fact remains that they have many years in which to recover from the current downturn. Young investors should have the majority of their investments in stocks. They can invest in conservative funds that offer healthy returns, while investors with a greater appetite for risk can invest some of their money in the more aggressive emerging markets and tech stocks. But remember that while these stocks can offer huge returns, the possibility exists for big losses, as well.

Investors in their 30s and 40s will be no strangers to volatile stock markets. If they've been investing for the last 10 to 20 years, they will have weathered ups and downs in the market. The current economic woes can be most frustrating for these investors. Not only have they saved enough over the years to be really hurt, but many of them also may have taken on obligations such as a mortgage and children. People in this age range should be sure to continue saving for retirement, keep enough cash on hand in case of unemployment, and resist the urge to drastically shift their portfolios into less risky investments. Also, keep investments diversified. Even if it didn't help much in the current market downfall, which affected every class of investment, diversification is always an effective, long-term strategy.

People in their 50s should continue saving, but should not put all of their money in the stock market. Continued saving will, over time, offset any losses they experienced in the market's drop.

Finally, people in their 60s - nearing retirement - are in the most difficult position. There is less time to make up losses. Withdrawing money limits gains in a market recovery. Investors nearing retirement who are genuinely worried should consider investing in safer investments, such as insured bank CDs.