Older investors target growth and technology

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Older investors are putting more of their savings into growth and technology investments, defying the conventional wisdom that the over-65s 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 — growth-focused actively managed funds — featured in the top 10 net Isa buys for over-65s in the 2023-24 tax year, ranked first, second and seventh.

These funds did not appear 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 the moment of retirement, the mix of their portfolio typically changes to minimise risk and ensure their capital is preserved. This is achieved conventionally by focusing on government and high quality corporate bonds, cash, gold and defensive equities that pay a reliable dividend.

But according to the platform, this approach may no longer be enough to sustain a comfortable standard of living in later life, especially given the poor performance in recent years of purportedly safer investments like UK gilts.

“With many of us living far longer, there is an argument to say that without sufficient risk in a retirement portfolio your investments won’t sustain the longevity requirements,” said Emma Wall, head of investment analysis and research at Hargreaves Lansdown.

Also popular is Legal & General’s US Index and International Index Trust — which both heavily feature technology companies such as Microsoft, Apple and Nvidia — and were the ninth and tenth most popular buys in 2023-24, according to Hargreaves Lansdown.

At platform rival Interactive Investor, the same funds were the second and ninth most popular buys. Older investors also gained exposure to technology through the Liontrust Global Technology fund and Polar Capital Technology Trust. 

According to Myron Jobson, senior personal finance analyst at Interactive Investor, most over-65s favoured dividend-paying UK blue-chip companies when selecting equities, but “there is evidence of growing adventurousness in investment choices that reflect prevailing investment themes at present”.

“A lot of people will have to make sure their lifetime investment horizon is longer than it will have been historically,” he said. “As such, people are taking on more risk because of that.

“Tech has also made a comeback amid excitement over the potential of artificial intelligence to transform various industries,” he said.

Older investors also favoured more volatile emerging market funds, such as the Jupiter India fund, on the back of the country’s strong economic growth.

However, proving that older investors have not entirely abandoned safer, income-based investing, two income funds feature in Hargreaves Lansdown’s top 10 ranking: Artemis Income and BNY Mellon Global Income. Financial stocks like 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 towards riskier assets may depend on the broader circumstances of their retirement income. Those who have already committed to a form of income for one portion of their funds may invest less conservatively with another, as well as for reasons of diversification.

“Those with big defined benefit pensions or property income might be willing to play a bit faster and looser with their investment portfolio,” said AJ Bell’s Laith Khalaf.

“Some others may simply be taking a more balanced approach to their investments rather than focusing on income alone, and it is of course possible to create an artificial income from growth funds by encashing shares.”

While conservative stocks such as Lloyds, GSK and Rolls-Royce are popular with AJ Bell’s over-65 clients, chipmaker and AI darling Nvidia was the fourth most popular buy in the year to date, after its share price rose 82 per cent over the period.

However, there are unique reasons that older investors tend to invest in less risky assets.

“People have to consider the cost of healthcare as they get older,” said Jobson. “That’s why a lot of over-65s historically invested a lot in income funds — so they can supplement their income in case of health issues.”