When you’re retired, it’s likely that your investment strategy will be rather different from when you were younger. But that doesn’t mean turbulent markets aren’t nerve-racking for retirees. In this Fool Live video clip, recorded on Jan. 27, Fool.com contributors Matt Frankel, Jason Hall, and Will Healy discuss how they would approach the current market downturn if they were retired.
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Jason Hall: I’m retired. Please talk about how you would look to invest in new opportunities in a portfolio already 100% invested. Maybe we can each just toss out one idea. The one idea that comes to mind quickly for me is it could be something as simple as. Again, David, we’re not telling you what to do. This is a broad for anybody that’s listening. One idea is if you own dividend stocks and you have them set to reinvest your dividends, turn that off. There you go, you don’t have to sell anything you love, let it free up cash, and then that cash is something you can use as a way to still invest in new ideas.
Matt Frankel: Yes, Jason kind of stole mine there. But I could say personally, I turned off dividend reinvesting as soon as I use TD Ameritrade for my brokerage. As soon as TD Ameritrade killed trading commissions, I turned off the dividend reinvestment because that was the biggest reason to use dividend reinvestment to be able to buy more shares without paying a commission.
Now that gives you a pool of cash every quarter from your favorite stocks that you can deploy in any opportunity you feel is the best at the time. This is what Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) does with all of its businesses. It pulls all the money they generate and invested in one opportunity that it feels is a great buy. That’s one thing I would say. Number two, just don’t pay too much attention to these short-term swings, especially in your dividend stocks. Don’t be too discouraged if your dividend stocks are off by 20%, 30%, as long as the business is still sound and they’re still making their payments. It’s a long-term investment.
Hall: Lou, Will any little ideas to add to that?
Will Healy: Well I would reevaluate whether you really believe in the stock unit, especially the ones that they’ve been losing a lot. We’re in a downturn in general, so a lot of stocks are being hammered just for that reason if the lifted business truly isn’t sound anymore, you might consider moving that cash into the business, you believe in. But again, you need to look at the business when you do that, not the stock price per se.
Jason Hall has no position in any of the stocks mentioned. Matthew Frankel, CFP® owns Berkshire Hathaway (B shares). Will Healy owns Berkshire Hathaway (B shares). The Motley Fool owns and recommends Berkshire Hathaway (B shares). The Motley Fool recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short January 2023 $265 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.