Always make sure that your investment allocation is aligned with your risk tolerance and time horizon. You shouldn’t chase returns by taking on too much risk, but you should ensure that your portfolio compensates you appropriately for whatever volatility you endure.
3. Maximize dividend income responsibly
Once you’ve reached retirement, it’s all about getting the most income from your investment portfolio without exposing yourself to catastrophic risk. The best dividend portfolio for retirees holds high-yield stocks, has some level of diversification, and avoids dud investments that could drastically slash dividends.
Stock picking can be a valid strategy for long-term growth, but it’s less effective when stability is the priority. That’s not to say that index investing is the best way to go, but any individual stocks should be part of a diversified portfolio in a retirement income portfolio. You don’t want your whole plan to fall apart if a company fails or drastically downsizes 10 years from now due to unforeseen developments.
The best stocks for long-term dividend income have stable profits and high, sustainable dividends. Look for companies with economic moats, steady long-term revenue growth, stable profit margins, and relatively low payout ratios. Dividend Aristocrats are popular stocks that consistently raise dividends over time. These are great for stability, but many of them have fairly low yields right now. Master limited partnerships (MLPs) and real estate investment trusts (REITs) are also popular income investments that can be purchased just like stocks.