Turning 25 is a significant milestone that often brings both independence and financial responsibilities. Financial experts recommend a strategic approach to investing that changes with age. They suggest starting with higher-risk investments like stocks and gradually shifting to more stable options such as bonds and real estate. This according to experts maximises growth potential in the early years and provides financial security as retirement nears.
For 25-year-olds, the investment landscape offers a great opportunity to embrace higher-risk assets.
Stocks, known for their potential high returns but also increased volatility, are often recommended for younger investors.
The reasoning is straightforward: younger investors have time on their side to ride out market fluctuations and recover from any potential losses.
Dorji Phuntsho, CEO of the Royal Securities Exchange of Bhutan Ltd said “the rule of investment is risk and reward. The higher the risk, the higher the reward. As you age, the risk tolerance become low. So, you would want to have continuous source of income. So, you are advisable to invest in fixed income assets such as bonds or fixed deposit, which will give predictable as well as a source of income, which the risk is lower than other asset class.”
The Royal Securities Exchange of Bhutan, RSEBL the country’s only stock exchange has suggested asset allocations based on age.
For example, apart from an emergency fund, a 25-year-old should keep at least 35 per cent of their earnings in cash savings and invest 65 percent in stocks.
By age 60 and above, the allocation shifts to five per cent in cash savings, 30 per cent in bonds, 20 per cent in real estate, 20 per cent in alternative assets, and 25 per cent in stocks.
In Bhutan, most investors are over 30 and tend to buy shares. However, according to the RSEBL CEO, financial literacy remains low among the population.
“As for Bhutan, unfortunately, our personal finance or financial literacy is low. This could be because normally in other countries, you have an incentive to save. You save primarily for health, for medical purpose or for education. But in our context, these facilities are provided for free or for a minimum charge or fee.”
For those living paycheck to paycheck, experts recommend the 50/30/20 budgeting rule.
To manage finances effectively, this rule allocates a set portion of income: 50 percent for needs, 30 percent for wants, and 20 percent for savings.
Samten Dolkar
Edited by Sherub Dorji
