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3 shares for a retiree’s portfolio

Tristan Harrison

If I were a retiree there would be a few things I’d be looking at for my portfolio.

Firstly, I wouldn’t be going for high-risk low-probability shares that could permanently lose my capital.

Second, I would need a decent income from my shares. I wouldn’t want to sell shares for income because you could have a recession and need to sell at the worst time.

Finally, I would want to invest in businesses that are growing. Businesses that are going sideways are more likely to be the ones that decline in value over time.

With that in mind, here are three ideas I would consider as a retiree:

WAM Research Limited (ASX: WAX)

As a retiree I wouldn’t need a lot of capital growth, just a bit. However I would like a large and sustainably growing dividend.

WAM Research is one of the best listed investment companies (LICs) on the ASX in my opinion. Its sole purpose is to invest in other shares on the ASX. The investment team try to find undervalued growth companies and sell once they reach the calculated valuation. WAM Research is very good at finding winners, its portfolio has returned an average of 17.5% per annum over the past five years before fees and expenses.

The LIC pays a growing dividend out of the growing profit. It currently has a grossed-up dividend yield of 8.96%.

Rural Funds Group (ASX: RFF)

Rural Funds is a real estate investment trust (REIT) that invests in farmland property, then rents it out to high quality tenants with rental indexation built into the contracts.

If I were a retiree I would want some of my money in property and Rural Funds is the best REIT in my opinion.

Rural Funds management aim to increase the distribution by 4% each year. It currently has a trailing distribution yield of 4.54%.

Challenger Ltd (ASX: CGF)

A lot of retirees want a secure income from their capital. Challenger is the clear leader of the annuity market to retirees in Australia.

As an investor it could be an idea to just buy Challenger shares as opposed to buying an annuity.

Challenger is currently trading at 17x FY18’s estimated earnings with a grossed-up dividend yield of 4.4%.

Foolish takeaway

I like all three as long-term investment ideas, which is why they’re in my portfolio. At the current prices Challenger looks quite good and WAM Research has just gone ex-dividend.

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Motley Fool contributor Tristan Harrison owns shares of Challenger Limited, RURALFUNDS STAPLED, and WAM Research Limited. The Motley Fool Australia owns shares of and has recommended Challenger Limited and RURALFUNDS STAPLED. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.