Going too far to protect your funds from market declines can actually increase your risk of running out of money in retirement. Experts suggest investing some of your savings in stocks, even after you retire, because it’s a smart way to make sure you don’t out live your money. However, not all stocks are created equal. Here are three things to consider when deciding what stocks to buy.
Think Diversification: A well-diversified portfolio will always minimize risk no matter your age. While U.S. bond yields are still historically low, don’t invest in them too heavily. There should be a good mix of stocks in your portfolio. If you’re unsure about the right balance, find a fiduciary financial advisor to help you decide the best way to achieve diversification.
Find Dividends: Historically, dividends make up a large percentage of the total returns of the stock market. Dividends are payments made by a corporation to its shareholders, usually as a distribution of profits. Start by researching stocks with high growing dividend yields and focus on those companies financially strong! Prioritize stocks with prices that don’t swing widely.
Reject Fear: Don’t let fear deter your investment decisions. It’s inevitable, the market will have its ups and downs. However, the long-term benefit of investing in stocks is well-documented. Owning stocks, even in retirement, can help your nest egg last longer. A recent study from the American Association of Individual Investors says that a higher allocation to stocks can lead to a higher return when money is being withdrawn over a 35-year retirement duration. If in doubt, remember, a good financial advisor can ease your fears and keep you on the right path.