2020 once again proved that making predictions about where equities may go in the coming weeks is difficult. However, what we all know is sooner or later, our golden years will be with us. Therefore, planning for the financial side of retirement is crucial. Seasoned investors realize that investing regularly in solid companies or funds for the long term could help them accumulate a considerable amount of wealth. Today’s article will introduce seven retirement stocks to buy to begin really growing your savings account.
Let’s assume an investor is now 30 years old with $5,000 in savings, and that person plans to retire at age 65. That individual decides to invest that $5,000 in a number of stocks or funds and make an additional $3,000 in contributions annually at the start of the year.
If this person has 35 years during which to invest and receives an average annual return of 9%, compounded once a year, at the end of 35 years, the total amount saved will be close to $807,444.
Investing $3,000 a year would mean putting aside $250 a month or about $8-$9 a day. And furthermore, if one could increase the amount contributed to $4,000 a year, the total savings over the same period stands at almost $1,042,569.
As these numbers show, regular investing over decades could help most of us retire comfortably. Since the initial sell-off in February and March of 2020, broader markets have rebounded powerfully. Although there may be short-term profit-taking during this earnings season, robust shares likely will see long-term gains in the coming years.
Against this backdrop, here are seven retirement stocks and ETFs to buy in 2021:
- Apple (NASDAQ:AAPL)
- Global X SuperDividend ETF (NYSEARCA:SDIV)
- International Paper (NYSE:IP)
- iShares Global Comm Services ETF (NYSEARCA:IXP)
- PayPal (NASDAQ:PYPL)
- Schwab U.S. Large-Cap Growth ETF (NYSEARCA:SCHG)
- VanEck Vectors Low Carbon Energy ETF (NYSEARCA:SMOG)
Retirement Stocks: Apple (AAPL)
52-Week Range: $53.15 – $145.08
Dividend Yield: 0.6%
Shareholders in Apple have had a strong 2020. Over the past 52 weeks, AAPL stock is up about 82%, making it an obvious pick on this list of retirement stocks. Today, the shares are just shy of $145. InvestorPlace readers will remember that the company had a 4-for-1 stock split in late August.
Many consumers regard Apple as a technology leader in consumer electronics. After all, it was the first U.S. business to reach a market capitalization of $2 trillion. It is a widely followed member of the NASDAQ-100 index, the Dow Jones Industrial Average and the S&P 500 index.
According to the latest Q4 results, revenue was $64.7 billion and earnings per share (EPS) came in at 73 cents. Additionally, almost 60% of apple’s sales come from non-U.S. markets. Investors were pleased that the company set a record high revenue for the September quarter overall as well as for services and Mac revenue.
Yet, the ever-important iPhone revenue of $26.44 billion, down 20.7% year-over-year (YoY), did not meet expectations. What’s more, Apple offered no guidance for Q1 ending in December. Those results are due on Jan. 27. Analysts will especially look at the sales numbers from the iPhone 12 and seek assurance for continued strong revenue metrics.
Institutional ownership of Apple stock is over 57%. Many investors watch these institutional positions as a gauge of short-term sentiment. In addition, algorithmic (algo) traders trade AAPL stock regularly intraday. Therefore, the short-term moves in the stock tend to be volatile and rapid.
The earnings season is likely to be volatile for many tech shares including Apple. Given how far the markets have gone up in the past several months, short-term profit-taking is also possible. Therefore, those investors with a view to buy Apple may consider any decline toward $120, or even below, as a good opportunity to buy the shares.
Global X SuperDividend ETF (SDIV)
52-Week Range: $8.03 – $17.53
Dividend Yield: 7.9%
Expense Ratio: 0.59%, or $59 annually on a $10,000 investment
Dividend stocks have always played a significant role in achieving investors’ retirement needs. Due to record low interest rates, the current economic climate has made such shares even more important for most investors. Nobel Laureates Eugene Fama and Kenneth French’s research has highlighted the importance of dividend shares in generating total returns for long-term portfolios.
As such, my next choice for retirement investments to buy is the Global X SuperDividend ETF. The exchange-traded fund (ETF) tracks the Solactive Global SuperDividend Index and invests in 100 of the highest dividend-yielding equity securities in the world. It could be of interest to investors who would like to have some international exposure.
The fund started trading in June 2011 and currently has 101 holdings. Impressively, net assets under management are around $780 million. As far as sector breakdown is concerned, real estate (29.7%), financials (18.3%), energy (14.5%) and materials (14.1%) take the lead.
As all equities are equally weighted to reduce the risk associated with owning any specific security, only 18.5% of the holdings are in the top 10 stocks. The top three companies are New Jersey-based B&G Foods (NYSE:BGS), gas- and oil-producer Diversified Gas & Oil (OTCMKTS:DGOCF) and South Africa-based Kumba Iron Ore (OTCMKTS:KIROY).
Over the past year, SDIV is down around 26%. It may require a good amount of time to take a contrarian view on global shares and include this high-dividend fund as part of a small international allocation in a long-term portfolio. We should, however, note that technology and health care are notably absent in the fund, as global companies in the sector are typically not high-dividend payers.
International Paper (IP)
52-Week Range: $26.38 – $53.39
Dividend Yield: 3.97%
Tennessee-based International Paper is a paper and packaging company with primary markets and manufacturing operations globally. The group operates through four segments: industrial packaging, global cellulose fibers, printing papers and consumer packaging.
Q3 results announced at the end of October showed revenues of $5.12 billion, down by 8% YoY. Furthermore, GAAP net income was $204 million, a decrease of 40.7% YoY. GAAP diluted net EPS was $0.52, a decline of 40%. And free cash flow was $616 million, slightly improved compared to $597 million in the third quarter a year ago.
Chairman and CEO Mark Sutton said, “Our performance continues to demonstrate the strength of our customer solutions and the scale and flexibility of our system. As we enter the fourth quarter, we see continued momentum in demand for corrugated packaging, and we will again leverage the commercial and operating strengths of International Paper with a focus on cash generation and maintaining a strong balance sheet.”
IP stock’s forward price-to-earnings (P/E) and price-to-sales (P/S) ratios are 13.74 and 0.95, respectively. Despite some negative results in the balance sheet, I believe IP has potential, considering the strong demand for packaging. This pick on my list of retirement stocks could be very interesting, especially for long-term investors.
iShares Global Comm Services ETF (IXP)
52-Week Range: $45.58 – $78.48
Dividend Yield: 0.95%
Expense Ratio: 0.46%
My next choice is another ETF. The iShares Global Comm Services ETF provides global exposure to companies in media, streaming entertainment, social media, search engine, video, gaming and telecommunication services.
The fund started trading in November 2001 and currently has 70 holdings. It tracks the returns of the S&P Global 1200 Communication Services 4.5/22.5/45 Capped Index, and net assets under management are more than $318 million.
As far as sector allocations are concerned, interactive media and services leads with 46.47%, followed by integrated telecommunication services (17.47%), movies and entertainment (11.01%) and wireless telecommunication services (8.66%).
The leading 10 holdings cover around 70% of the portfolio. The top three stocks, which make up more than 35% of the net assets, include Facebook (NASDAQ:FB) and Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG).
IXP is up by 5.7% since the start of the year. This uptrend may continue considering the growing interest in social media and streaming entertainment services. Since the stock has already reached a certain price, it could be a good idea to stay neutral in the short term and wait for any drop in the price.
PayPal (PYPL)
52-Week Range: $82.07 – $254.39
Payments platform PayPal enables digital and mobile payments for both consumers and merchants. Most of us have used its range of payment solutions, such as PayPal, PayPal Credit, Braintree, Venmo, Xoom and Paydiant. Plus, the company’s history goes back to 1998.
PayPal released robust Q3 results: Revenue came in at $5.46 billion, up 25% YoY. Total Payment Volume (TPV) was $247 billion, an increase of 36%. The numbers represented the strongest growth in revenue and total payment volume in the company’s history. Net income came in at $1.02 billion, up 121% YoY. Non-GAAP EPS was $1.07, up 41%.
CEO Dan Schulman cited, “Going forward, we are investing to create the most compelling and expansive digital wallet that embraces all forms of digital currencies and payments, and operates seamlessly in both the physical and online worlds.”
PYPL stock’s forward P/E and P/S ratios are 56.18 and 14.73, respectively. This is a frothy valuation. Increased digital payments during Covid-19 have helped the company share price reach new highs. However, as its next earnings date approaches, there could be further volatility in the stock price. Long-term investors could consider buying the dips in PYPL shares. Its top-line momentum, diversified product offerings and earnings power are here to stay for many quarters, making it a clear pick for this list of retirement stocks.
Schwab US Large-Cap Growth ETF (SCHG)
52-week Range: $67.25 – $133.99
Dividend Yield: 0.52%
Expense Ratio: 0.04%
My next choice for retirement stocks to buy is another fund: the Schwab U.S. Large-Cap Growth ETF. It provides exposure to U.S.-based large-cap growth stocks. Different brokerages may have slightly different definitions for large cap shares. Yet, a firm with a market cap of more than $10 billion is generally regarded as a large-cap business. Close to 80% of the businesses in SCHG have markets caps above $70 billion.
The fund, which has 229 holdings, tracks the Dow Jones U.S. Large-Cap Growth Total Stock Market Index. Since its inception in late 2009, assets under management have grown to $13.47 billion.
In terms of sectors, information technology (IT) has the highest weighting (45.54%), followed by consumer discretionary (16.39%), communication services (14.5%) and health care (12.69%).
The top 10 holdings make up close to 45% of the assets. Apple and Microsoft (NASDAQ:MSFT) lead the fund with 13.17% and 10.13% stakes, respectively. Other heavyweights include Amazon (NASDAQ:AMZN), Tesla (NASDAQ:TSLA), Facebook and Alphabet.
Over the past 52 weeks, SCHG has returned about 37.6%. Trailing P/E and P/B ratios are 41.23 and 8.69, putting the valuation on the expensive side. A potential decline toward $120 would improve the margin of safety.
VanEck Vectors Low Carbon Energy ETF (SMOG)
52-week Range: $49.81 – $195.30
Dividend Yield: 0.06%
Expense Ratio: 0.62%
My final choice in another ETF, namely the VanEck Vectors Low Carbon Energy ETF. It provides exposure to global firms within the clean-energy space. Such businesses typically focus on the production or use of alternative energy. Power derived principally from biofuels (like ethanol), solar, wind, hydro and geothermal sources are at the core of their operations.
SMOG, which tracks the Ardour Global Extra Liquid Index, has 30 holdings. U.S.-based companies lead the roster with more than 54%, followed by China (18.24%), Denmark (14.65%) and South Korea (4.04%). Since its inception in May 2007, its net assets have reached $270 million.
In terms of sectoral weightings, industrials (32.3%), information technology (32.1%), consumer discretionary (22.8%) and utilities (9.4%) have the highest allocation.
The 10 largest holdings constitute more than 65% of the fund. Denmark-headquartered Vestas Wind Systems (OTCMKTS:VWDRY) and electric-vehicle (EV) leaders Tesla and Nio (NYSE:NIO) lead the names in the ETF.
Over the past year, the ETF has returned over 145%. As the new earnings season moves on, short-term profit-taking in the names in the fund is likely. A potential drop toward $170 or below would improve the margin of safety. Nonetheless, this decade is likely to become the growth decade of the sector worldwide. Therefore, investors should consider it for retirement accounts.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.
