Karen feared she would never retire. In her 60s, she learned to invest and built a six-figure portfolio in just four years – proving it’s never too late to build wealth

When she turned fifty, one question loomed large in Karen’s mind: “Will I ever have enough money to retire?”

The busy Sydney mum had always been diligent about managing her finances and mortgage via spreadsheets. But after paying “non-negotiable” bills, groceries, gas and private school fees, there was little left for savings.

“For years I thought my husband and I would have to work forever to earn an income. I was quite pragmatic about it and felt there wasn’t much I could do to change things,” Karen, who is now 70, told FEMAIL.

“I tried not to worry too much about the fact that I might have to work full-time until I was 90.”

A few years later, the dire situation began to ease. Her children grew up and moved away, leaving Karen and her husband with more money to ‘play’ with – so they decided to think seriously about retirement.

She had entered the stock market as a young woman in the 1980s when she invested about $3,000 in three to four companies, but she did not fully understand what she was investing in, or why, and thus failed to make any significant returns.

After finally paying off the mortgage on the family home, Karen decided to get serious about investing during the pandemic and enrolled in a Mastering Money course with SkilledSmart, all about managing finances and investing wisely.

Four years later, she is comfortably retired and has an impressive investment portfolio worth $200,000 with CommSec, in addition to $500,000 in pension.

Karen (pictured), from Sydney, always feared she would never have enough money to retire. During the pandemic, she took matters into her own hands and learned about investing

Growing up, Karen lacked what we now call financial literacy and had “no idea” how to start investing, so she had to learn it herself.

It wasn’t until she was well into her sixties that she started reading books and magazines about investing, which steered her in the right direction. There was an element of trial and error at first, but over time her confidence grew.

These days, she’s seeing income coming in from her various investments in the Australian stock market, making her feel “more positive and reassured about the future.”

She uses CommSec and finds it one of the best options with the cheapest brokerage fees.

“I used to work with a real stockbroker, which was common before online brokers,” Karen said.

After just four years, she is comfortably retired, with an impressive investment portfolio worth $200,000, in addition to $500,000 in pensions.

What does Karen invest in?

Karen’s portfolio consists primarily of Australian equities across seven to nine sectors, with a greater focus on the financial and consumer sectors.

She invests in both ETFs (exchange traded funds, or a ‘basket’ of multiple companies) and direct equities.

“I don’t have a strict allocation that I stick to, but I do pay attention to the balance between different sectors, so if the portfolio starts to lean heavily towards one sector I can try to rebalance it,” Karen said.

‘For example, at the moment my investments in the financial sector are a much larger percentage of the portfolio than is perhaps ideal, so I might consider investing in other sectors to balance that out a bit by investing more in other sectors buy.’

In terms of how often she invests, the retiree tries not to “buy on the dip” or “time the market,” but instead focuses on the time spent in the market.

She only makes a handful of trades a year – she estimates about six – and makes her decision based on the income the stock can generate.

“If I think there’s a need for it, I’ll sell it every now and then,” Karen said.

‘I don’t tend to time the market, I look at the total package, what’s more important is buying a good quality investment.’

Karen said she always pays attention to the amount of money she has in each sector and tries to keep her portfolio from going in a certain direction. However, she adds that this is not a “strict rule” but rather a “guiding principle.”

‘I like to focus on one industry at a time and determine which specific investments I want to make in it. In recent years I have become more interested in investments that yield good dividends,” she explains.

“While that’s certainly not decisive, I think I appreciate it more now given my stage of life where having that extra income stream is helpful.”

Real estate is often seen as the golden ticket to a financially secure retirement for baby boomers, but Karen has played a different role. Instead of buying an investment property, she has focused on the stock market (stock image)

Karen once owned an investment property in her 20s, but sold it shortly after she married and subsequently bought a family home with her husband.

Since then, she has not invested in real estate, simply because of the necessary capital, which she did not have.

‘Real estate costs a lot more money up front, while you can buy shares with much smaller amounts, making it more accessible. It is also simpler than real estate investing, so I found it easier to stick with stock market investing,” she said.

She never thought about investing in cryptocurrency, which is popular among younger investors, because of how complex and confusing it can be.

How does Karen deal with risks?

Karen said the most important aspect when it comes to investing and risk management is to continue to learn and educate yourself.

‘Over time you improve. You don’t make guesses, you make informed decisions and you get better every time. I don’t think you’re ever too old to learn something new. That helps you build the skills and knowledge to make better decisions, allowing you to minimize and prevent mistakes,” she said.

Karen also makes sure to diversify her portfolio by ‘not having all her eggs in one basket’ – a popular strategy. This minimizes the risk if a sector declines in value or, in the worst case, if a company permanently goes bankrupt.

Another way she manages risk is by looking beyond her investments and focusing on the rest of her finances and her cash flow management.

‘Over the years I have tried to be careful in tracking expenses. At one point we had debts that I made a priority to pay off. This meant I could keep my investments invested and growing without having to sell urgently or in an emergency,” she said.

Her only regret is that she didn’t start sooner. “If I had understood at 20 what I know now about investing, I would be in a much better position today,” Karen said

Her only regret is that she didn’t start sooner.

“If I had understood when I was 20 what I know now about investing, I would be in a much better position today,” Karen said.

‘But it’s never too late to learn. I am grateful that I took the leap, even later in life, because it has given me a sense of security and peace of mind.”

KAREN’S THREE GOLDEN MONEY RULES

1. Start as soon as possible

Karen’s main advice to others is to just start, whatever your age. But the sooner you start, the better off you will be.

‘I wish I had started years earlier, but I had no guidance. No one in my family knew about it,” she said.

‘I only came into contact with it later in life. The sooner you start, the better, and over time you will become more disciplined with your money.”

2. Take an active interest – don’t leave it to your husband

Karen hopes women will be inspired to take the lead with their finances, instead of letting their husbands do all the work.

“I think a lot of women in particular find it too difficult, but it’s important to show interest,” she said.

‘Even if your partner is the one managing the finances now, you never know what might happen to your partner or what the future holds. It takes some time and a willingness to learn.

‘It may feel like a slow and gradual process, but over time you build trust. You can do it at any age; it’s never too late to learn. I hope my story inspires others to see that.”

3. Expose yourself to financial content

When investing, it’s important to stay up to date on financial news and how companies are tracking it so you can decide where to spend your money.

Doing this will also help you understand the different terminology.

“Over time you start to put the different financial terms and concepts together, and it starts to shape your thinking,” Karen said.

‘Then it becomes easier to make better decisions, because you are less influenced by all the noise, you have more confidence and clarity in your own decision-making and knowledge.’