Increasingly, with the decline of traditional pensions, it is up to the individual to plan his or her retirement strategy. Most financial planner would advise that at least some of a retirement portfolio should be invested in stocks. But which ones?
Stocks come in a variety of types, broadly divided into two basic types, value stocks and growth stocks. But even within these broad classes, it can become confusing with considerations such as market capitalization, dividend yield, foreign or domestic, among many others. A recent article by James Brumley, appearing in InvestorPlace, slices through the confusion and highlights ten stocks that are ideal for many retirement portfolios.
Mr. Brumley contends that you want to own large, stable, profitable companies, not only in a current retirement portfolio, but also in one leading up to retirement. The reason for this is these stocks provide consistency of return and most pay generous dividends, both of which are ideal for retirement nest-eggs.
Three of the ten stocks are utility stocks. Utilities provide things that everyone needs, are highly profitable firms, and pay generous dividends. As a result, they are likely to be relatively stable over the years. Mr. Brumley suggests AT&T (T, 5.3% dividend yield), Southern Company (SO, 5.2%) and American Water Works (AWK, 2.1%).
Drug companies have long attracted conservative investors. Prescriptions drugs are big business and Merck (MRK) is a name with a large pipeline of new drugs coming out to the market in the near future. These investments can be potentially explosive, so a bit of research and timing can be helpful here.
Real estate stocks offer investors a way to participate in the market without outright ownership of the properties. One of the best is Realty Income (O), paying monthly dividends and currently yielding about 5%.
Banking and Finance
Mr. Brumley suggest Visa (V) and Bank of America (BAC). Although not as generous with dividends as the utility or real-estate sectors, these two issues are solid, profitable stocks with good growth potential.
Technology is here to stay. Stick with the king, Intel. Its chips power our electronic devices, thereby powering its generous dividend (2.4%) and its future growth potential. Scrutinize new startups that seem to be on the rise if you are feeling particularly daring.
Rounding out Mr. Brumley’s suggestions are Boeing (BA) and WalMart (WMT), two iconic American firms with stable ongoing profitability.
Should you buy any of these well-known names now? That, of course, depends on your investment objectives, your risk tolerance, and your current asset mix. If, however, you are looking to add stocks to your retirement portfolio, these solid firms are ones to research further.