How Should You Allocate Your Portfolio As Retirement Nears?

With the recent decline in the stock market, it’s a good time for investors getting closer to retirement age to take a look at their asset allocation. In this Fool Live video clip, recorded on Jan. 27, contributors Travis Hoium, Rick Munarriz, and Matt Frankel discuss how they approach asset allocation as they get closer to retirement age.

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Travis Hoium: I just wanted to open this on a broad level and ask how you guys think about your portfolio and allocating if you are getting closer to retirement and what do you think about as far as stocks move into things like bonds, growth of stocks versus value stocks, take the direction that you want, but how do you think about that as somebody’s moving closer to retirement? Rick, maybe I’ll start with you.

Rick Munarriz: I’m not 70 but my wife is pondering early retirement in a year and a half or so. Just a little background on the part of the original Rule Breakers team. Since like 2004, I’ve been with the Fool since 1995, but when we launched the service in 2004, I was there with David Gardner. We basically have been there for the whole time so I am a growth stock investor through and through. That’s what excites me.

But a year ago and thankfully, a year ago, just around the time the market was peaking, I started looking, reading a similar like Matt Frankel and corporate thing we’re doing and I went to picking up a couple of REITs, a couple of dividend stocks. I went with stocks like Mid-America Apartments (NYSE: MAA), Realty Income (NYSE: O), any stocks that the rest of my growth stocks were getting pummeled it added to the diversity. Matt knows the REIT market better than I can even pretend to.

I don’t know if the gains will be duplicated, but again, my top five stocks a year-ago are slightly different than they are. You and I still have my growth stocks are still high by Netflix (NASDAQ: NFLX), Roku (NASDAQ: ROKU), Disney (NYSE: DIS). But there is a lot of American Tower (NYSE: AMT), Digital Realty (NYSE: DLR), a lot of different REITs that I think do different things like growth REITs as I like to call them. But that you provide a little bit of personal income, which is going to be important.

No matter when you’re going to retire, it will become handy, but also positions yourself better for volatility not to be concentrated in just one specific, investing style. Especially as you get closer to retirement, you will have to be looking at being diversified enough so that if you perform at the market, it’s one thing, but you don’t definitely want to underperform the market, which may happen if you’re overly concentrated in one sector.

Hoium: If I can see what you just said in a little bit different way with a lot of the companies that you mentioned, you’re basically saying, I’m really excited about tech and the growth in tech, but I don’t necessarily want to take a risk on any specific company winning in tech, I’m going to buy the infrastructure companies like American Tower does, as they own the real estate that then 5G assets go into, so that’s what you are saying, Rick?

Munarriz: Yes. I think sometimes you can’t play. The reason I like Roku is the same thing and it’s a different type of thing where it’s a play on the success of all streaming services. It’s not just saying, I’m not going to buy AT&T (NYSE: T) things. I’m a believer on HBO Max or I’m a believer in Disney, somebody buys it, plus I’m ongoing Disney. You can buy the basket sometimes and that helps like buying Coinbase (NASDAQ: COIN) instead of buying individual cryptos because as the market goes in, ups and downs and even down, Coinbase can still be profitable because just more trades are happening. Yeah. It is a thing. I do tend to like plays that are more pick and shovel plays for everybody across-the-board sometimes, yes.

Matt Frankel: Normally what I would add to that is Digital Realty Trust is one of my top holdings that their data center reach and all the big tech companies lease from them and no matter who wins, they’re going to win. But if I’m 70, my top holdings will probably look about the same as they do right now.

As Rick mentioned I am the real estate guy, my biggest holding is called Empire State Realty Trust (NYSE: ESRT). They own the Empire State Building, they get a bunch of office REITs. It’s not a play on any single company’s return to the office or anything like that, it’s a play on the fact that iconic office buildings are going to be around. It’s a great income play. Other top holdings of mine are, General Motors (NYSE: GM) is among my top five. Disney’s really close to my top five companies that are going to be around forever. I like to say I looked for a great combination of growth, income, and stability, and if I could find all of those three things that makes a great retirement stock.

Matthew Frankel, CFP® owns AT&T, Digital Realty Trust, Empire State Realty Trust, General Motors, Realty Income, and Walt Disney. Rick Munarriz owns AT&T, American Tower, Coinbase Global, Inc., Digital Realty Trust, Mid-America Apartment, Netflix, Realty Income, Roku, and Walt Disney. Travis Hoium owns Coinbase Global, Inc., General Motors, and Walt Disney. The Motley Fool owns and recommends American Tower, Coinbase Global, Inc., Digital Realty Trust, Mid-America Apartment, Netflix, Roku, and Walt Disney. The Motley Fool recommends Empire State Realty Trust and recommends the following options: long January 2024 $145 calls on Walt Disney and short January 2024 $155 calls on Walt Disney. The Motley Fool has a disclosure policy.

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