Retirees May Be Forced To Own More Stocks Than In The Past

Recently I’ve been reflecting on an article from the WSJ in April 2017 entitled, “As Interest Rates Rise, It May Be Time to Tweak the Portfolio”. In it, the author discusses that unlike earlier times, retirees can no longer count on earning reasonable rates of return from placing their retirement savings into cash, CDs, and other safe interest bearing securities. Interest rates are too low for that.

What, then, are investors to do NOW with their retirement nest eggs? The author suggests that retirees will need to allocate more into stocks than previous generations in order to preserve capital and keep pace with inflation.

Retirees will need to hold more in stocks, the author notes a number of tactics to pursue, and here at Worldview we are in agreement with all of them. In fact we’ve already implemented many of these strategies into portfolios.

Those key tactics recommended during this period where retirees are being forced to allocate more capital to stocks include:

1. Focus stock investments on lower risk companies, minimize exposure to the big tech stocks with sky-high valuations. Expensive stocks are naturally at greater risk for a sell-off.
2. Stay super diversified, and avoid significant concentration into any one company or sector.
3. Avoid stocks that have a sensitivity to rising interest rates, like utilities. They may pay a higher dividend, but that may not help much when the stock price tanks.
4. Look for higher returns in international and emerging market stocks, which have lower valuations than US stocks.
5. Be ever vigilant about keeping fees and taxes low


These are all as important today as they were 18 month ago when the article was written. View the original article here.