A little diversity here, a little security there.
There are several components to a well-rounded retirement portfolio.
You shouldn’t put all your eggs in one basket, but you don’t need a whole bunch of baskets.
It’s all about balance.
There are all kinds of ways to create a great portfolio, but you have to start with a solid foundation.
An IRA is a great foundation for retirement, whether it’s in addition to your company retirement account or on it’s own. Let’s look at 3 parts to a great IRA…
1. Index Funds
I’ll start with my favorite. Index funds are indeed my favorite.
Diversity. Stability. Security.
Those are only a few of the things that index funds can provide.
You should have a nice mix of domestic and foreign index funds.
You can choose actively managed mutual funds if you really want to, but they aren’t necessary.
Consider throwing in some bond index funds.
More on index funds here. More on specific index funds for retirement here.
2. Solid Dividend Stocks
If you want to throw some individual stocks in your portfolio, try some well established dividend stocks. Think Dow Jones companies.
Here are a few:
- 3M Co.
- Coca Cola Co.
- Johnson & Johnson
- McDonald’s
- Proctor & Gamble Co.
Go for fairly high-yielding dividend stocks, but a high dividend shouldn’t be all you look for. Look for companies with a strong brand and strong financials.
It’s great to earn a dividend whether the stock price rises or falls. You can reinvest your dividends to keep buying more stock.
Once you reach retirement, you can start receiving income through dividends.
3. Warren Buffett’s Picks
Considering that Buffett made his money through investing, I think it’s safe to say that he knows what he is doing.
He has created a portfolio of great long-term value stocks, as well as many really solid private companies.
Think of it like a mutual fund that was created and managed by Buffett himself.
If you didn’t know, I am talking about Berkshire Hathaway.
This is the one stock that I would recommend to anyone. It’s Buffett’s holding company for investments and businesses.
Class A Shares (BRK.A) will run you close to $200,000 each, but for us normal people, we can buy Class B shares (BRK.B) for under $200 each (at the writing of this article).
With high capital, low debt and an annual growth of 19.7% to its shareholders for the last 48 years, it’s really a no-brainer.
Final Words
Your retirement portfolio may include more than these funds and stocks…and that’s fine.
You can always invest in some income real estate. You can even buy physical commodities like gold and silver.
The recommendations here are meant for your IRA.
Remember, diversity should include all kinds of investments, not just stocks and other paper assets. Additionally, if you have multiple 401(k) accounts from previous employers, you might want to learn how to consolidate 401(k) accounts to simplify management and potentially reduce fees.
This gives you a great idea on where to start and what you may want in your portfolio.
Don’t think you have enough money to start? Read how to start your retirement for under $100.
Read more about how and when to start investing for retirement here.