Not everyone prepares for retirement in the same way. Some of us start way ahead of time, in our 20’s. Some of us actually only realize that they should have saved for their retirement, a few years before it happens. You should start as early as possible building your retirement funds, so that when the time comes you don’t have to rush into it. Putting some money aside every month, and using a retirement budget is a great way to achieve those goals.
When you retire you will need to rely on a source of income, and there are many choices out there. From real estate, to bonds, funds and even individual stocks. Where should you start? Well certainly the easiest way is to select a high quality fund. Either a mutual fund or an ETF could be the perfect vehicle to allocate your wealth while you save for retirement. Our preferred choice is definitely blue chip stocks.
Blue chip stocks
Blue chip stocks tend to be conservative investment vehicles that are safe, and suitable for the long-term. As a retiree you don’t want to worry about where you have your money, so these companies are excellent for that purpose. They are usually well known, and can provide you with a source of stable income through dividends. You know their products and services well enough to know that they are not going out of business anytime soon. One of our favorite picks is Coca-Cola. Although you can do a Coca-Cola analysis, you are already familiar with the company and the brand. This incredibly popular fizzy drink is recognizable in all four corners of the earth. So much so that its daily sales are the highest of any sugary drink. It's not an incredibly technological investment, but it is one that should allow you to receive an extra income without worrying what will happen next.
Blue chips are better than bonds
Bonds tend to be one of the safest investment vehicles out there. Government bonds tend to be a safe investment, but at the same time their returns are very small. Investors are rewarded by the risks they take, and although we would like to have the safest investment possible - this kind of investment does not guarantee a good retirement portfolio.
With the yield of government bonds at such low values. We can’t help but wonder how different the portfolio returns of some retirees buying solely blue chips is going to be in comparison with bond portfolios. The blue chip portfolio certainly carries more risk, but it provides a higher income through its dividend. On top of that the appreciation in price is another benefit that provides wealth creation, as opposed to bonds, which tend to trade around the same prices.
For these reasons we like Coca-Cola stock, it provides enough income and it is certainly going to appreciate overtime. The risk is minimal, as most people that drink sugary fizzy drinks will continue to do so. There are countless blue chips stocks out there to choose from. Look them up and build your portfolio with them, you are sure to do well overtime, and have a nice and comfortable retirement fund.