While most investors entering their 50s and 60s look to lessen risk in their portfolio as they inch closer to the goal of retirement, those not looking to leave the working world may have more options to keep their wealth expanding.
It's no secret many people are staying in the workforce longer — last year Pew Research numbers showed nearly nine million Americans ages 65 and older reported being employed full- or part-time, compared to just about four million people at the start of the century. Many of these people are doing so not because they haven't saved for retirement, but still are enjoying their careers.
That gives these people more options — at least to an extent, experts agree.
"Certainly older workers choosing to remain in the workforce can — and should — have more aggressive portfolios than those who have chosen to retire," said Robert Johnson, resident of The American College of Financial Services. "But, in my opinion, that aggressive portfolio should not be manifested by more exotic holdings. The older worker continuing to work can afford to have a more aggressive asset allocation — a higher percentage of stocks and a lower percentage of bonds."
Johnson said most notably, do-it-yourself investors should not be experimenting with options and futures — as they are simply a zero sum game — but should stick in the stock market.
"The stock market is a positive sum game over time — that is, wealth is created in the aggregate," he added.
One alternative investment older workers could consider, however, is real estate, according to Michael Episcope, co-CEO of Origin Investments.
"Real estate is considered an alternative investment and common wisdom says that about 20% of a balanced portfolio should be in alternative investments," said Episcope, adding he sees high net worth investors — many around their mid-forties or older — are diminishing their investments in equities and hedge funds and greatly increasing their investment in real estate.
"Real estate can offer cash flow and tax advantages," he said. "Real estate equity funds offer tax advantages through depreciation, while real estate debt funds can deliver steady cash flow with dividends that are distributed on a specific schedule."
Real estate also can offer a counterpoint to the day-to-day fluctuations of the stock market — real estate values remain consistent and are not linked to the value of the broader stock market, he added.
At the end of the day, how exotic someone wants to get is up to them, and there are more options than ever. However Michael Chadwick, with Chadwick Financial Advisors, said while exotic holdings are an option, they may not be wise for them to treat in those waters.
"Today it's never been easier for investors to go into futures, commodities, currencies, even cryptocurrencies today are available but investors need to be cautious, especially after their 40s, to preserve capital," Chadwick said. "We're in the riskiest markets ever and some alternatives may make sense from a risk reward perspective such as commodities, shorts, volatility tools, metals, etc. — but it's imperative for investors to be risk managers at these levels. We've been spoiled, eight years straight up and it's not going to last."
Keisha Blair, co-founder of online money and career platform Aspire-Canada, points out futures, in particular, are speculative, leveraged instruments and aggressive traders can lose big, but these derivatives also can be prudent ways to diversify portfolios and hedge against losses in volatile markets.
"Commodities, stocks, Treasury bonds, global currencies — even the weather — are among the many types of investments tied to futures," Blair said. "Buying and selling takes a high level of sophistication, and that's why futures are mostly a tool for institutions, hedge funds, trading firms and wealthy investors."
Perhaps the best advice for those still working and investing into their "golden years" is unfortunately the least sexy.
"The best advice for most investors is 'KISS' - keep it simple, stupid," Johnson said. "Most investors are best served by investing in broad equity market index funds with low fees. Over time that is the best wealth accumulation method."