The conventional wisdom is that the sooner you start investing, the better off you’ll be in the end. After all, the time you’ve been in the market can serve as a flotation device, holding you up from the cresting and falling waves of the market. It’s such a common piece of advice that if you’re retirement age, or close to it, and haven’t dipped your toe into investing, you might think it’s simply too late.
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But just as anyone, at any age, can learn how to swim, anyone, at any age, can learn to invest wisely. GOBankingRates connected with financial experts who have advice about the kinds of market moves Baby Boomers investing for the first time should make.
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1. Dividend-Paying Blue-Chip Stocks
Blue-chip stocks can be a great way to see real green. They’re shares of large and financially stable companies that are well-established — think Apple, Costco, Walmart, JPMorgan Chase & Co., Morgan Stanley, Nvidia Corp. and IBM — and have a significant history of growth. Because of their status, they’re typically included in major market indexes.
David Materazzi, CEO of Galileo FX, an automated trading program, says that blue-chip companies are an ideal starting point for Boomers entering the market.
“Stick with companies that have been around a long time, make real money, and pay you a piece of it every quarter,” he said. “Peace of mind. Think Coca-Cola, Johnson & Johnson, Procter & Gamble.”
2. Broad-Based Index Funds
Materazzi also has advice for people who are anxious about picking individual stocks.
“Don’t. Just buy the entire market.” You can do that, in a nutshell, by investing in an S&P 500 index fund. The S&P 500 — short for Standard & Poor’s 500 — is a stock market index that tracks the performance of the 500 leading companies listed on U.S. stock exchanges.
“An S&P 500 index fund gives you a slice of America’s biggest, strongest companies,” he added.
3. U.S. Treasury Bonds or I Bonds
As loans to the U.S. government, Treasury bonds and I bonds are considered some of the safest investments available, Materazzi said. However, there is a trade-off: they typically provide lower returns than stocks.
“They’re about as safe as it gets,” he said. “But you have to balance that safety with your goals and how much income you need in retirement.”
4. Stock Sectors With Strong Dividends
When Asher Rogovy, chief investment officer of Magnifina, an SEC-registered investment advisory firm, is advising clients, his goal is to help them achieve sufficient income in retirement through dividends.
“It’s not as simple as simply trading a portfolio of growth stocks for dividend stocks upon reaching retirement,” he said. “Rather, we gradually shift the portfolio’s focus as retirement approaches.”
To achieve those strong dividends, Rogovy recommends looking into stock sectors known for reliable payouts, such as financials, energy and utilities.
“We prefer to select individual stocks rather than a fund to ensure our clients are investing at appropriate valuations,” he said.
5. Real Estate Investment Trusts
Rogovy also recommends that Boomers explore real estate investment trusts (REITs) and fixed-income securities as alternatives to dividend-paying stocks.
“We view the former as another stock sector, even though it’s technically different,” he said. “As for fixed-income securities, while these often provide higher yield, they remain exposed to inflation risk. With stocks, inflation causes short-term volatility, but over the long-term, stocks are a textbook hedge against inflation.”
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Bottom Line
Investing doesn’t have to be a young person’s game — you can get started at any age. With the right moves and a wise approach that includes blue-chip companies, high-dividend sectors, U.S. Treasury Bonds and even REITs, you can build another stream of retirement income at a time when you’ll need it most.
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Sources:
David Materazzi, CEO of Galileo FX
Asher Rogovy, chief investment officer of Magnifina
This article originally appeared on GOBankingRates.com: I’m a Financial Advisor: 5 Stocks I’d Recommend for Baby Boomers Investing for the First Time
