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Strategies for a successful retirement

Building a Retirement Portfolio: Stocks to Hold for the Long Run

When planning for retirement, it’s essential to build a portfolio that not only grows but also protects your nest egg. Whether you’re a conservative investor focusing on funds or someone with a higher risk tolerance looking at individual stocks, selecting the right assets for the long term can provide both stability and growth. A well-diversified portfolio reduces risk and helps navigate the inevitable ups and downs of the market, ensuring your retirement savings last.

How We Picked These Stocks: Diversification for Risk Reduction

The stocks chosen for this retirement portfolio are carefully selected to offer both growth potential and risk mitigation through diversification. By spreading investments across different sectors, investors reduce the likelihood that a downturn in one industry will significantly impact their overall portfolio.

For example, investing in sectors like technology, consumer goods, and energy provides exposure to different parts of the economy, each reacting differently to market forces. Microsoft, a technology giant, benefits from digital growth and cloud computing, while Chevron, an energy leader, generates strong cash flow from oil and gas. If tech stocks face a market dip, Chevron’s performance may remain stable or even rise due to different market drivers.

This kind of sector diversification ensures that even during periods of economic volatility, your portfolio remains balanced, protecting your retirement savings from excessive risk. By combining growth-focused stocks with steady dividend payers, you gain a mix of appreciation and income, creating a robust portfolio that supports long-term wealth accumulation while protecting your hard-earned retirement funds.

Plus, we have included companies that offer high dividends so you can continue to have a good flow of income.

When we talk about long-term investing, we expect you to hold these for at least 10 years and ideally longer. But remember that no stock can be held forever without monitoring. Some companies, due to their competitive advantages, are likely to remain strong in the long term. 

Stock Picks for Long-Term Investing

1. JP Morgan & Chase

With origins dating back to 1799, JPMorgan has a long-standing reputation as a leader in the banking industry, known for weathering economic challenges. It fared significantly better than its competitors during the 2008 financial crisis and was the first major U.S. bank to restore its pre-crisis dividend levels. 

More recently, in 2023, JPMorgan showcased its strength again by acquiring the troubled First Republic Bank, expanding its scale by purchasing the business at a discounted price.

While its dividend yield may not be the highest in the sector, JPMorgan's quarterly payout has surged from 5 cents in 2011 to $1.15 today. With earnings per share expected to exceed $18 this year, the bank has substantial room for future dividend growth, making it a strong choice for long-term investors.

At the current 10-year growth rate, it will hit $424.41 by 2030, nearly doubling from the current price.

2. Starbucks

Starbucks is a stock with a "wide economic moat," meaning it has a durable competitive advantage. Most experts think the company will out-earn its cost of capital for at least 20 years. 

There are some short-term concerns, but Starbucks’ long-term potential cannot be neglected. The company is very aggressive and plans to grow to 55,000 by 2030, growing on average of eight stores per day.

It expects international growth will play a critical role, fueling about one-third of the company’s earnings growth potential over the long term. The stock offers good dividends with a yield of 2.47% and can be a winner in the long-run. Starbucks is rewarding and has raised its dividend for forteen consecutive years. Plus, it has also reduced its shares outstanding by over 24% during the past decade.

All this combined makes it a good stock to hold.

3. Kenvue

Kenvue, a consumer health company that was spun off from Johnson & Johnson in May 2023, usually doesn’t make it to the list but is a top pick for some investors, including Susan Dziubinski, investment specialist at Morningstar. 

With global-leading brands like Tylenol, Listerine, Aveeno, and Neutrogena under its umbrella, Kenvue operates in a competitive industry but holds a strong position. Morningstar forecasts a 3.1% annual growth rate in sales for the company through 2028.

Kenvue Inc is expected to reach an average price of $47.58 in 2035, with a high prediction of $47.71 and a low estimate of $47.67. This indicates an +105.08% change from the last recorded price of $23.20. However, we must mention that consumer healthcare companies can be very risky to invest in but having one in your portfolio can be a good way to diversify. 

4. Microsoft​​

Microsoft is a powerful name that needs to be in everyone’s retirement plan. Some people argue that it’s capatilizing on the wrong players but we think Microsoft is going very strong and will continue to benefit from Azure and other such investments.

Microsoft generates strong free cash flow, typically exceeding 30% of sales. In the nine months ending March 31, 2024, the company produced $81.35 billion in operating cash flow and $50.75 billion in free cash flow, covering $13 billion in dividends and $16.1 billion in share buybacks.

With analysts projecting a 14% revenue increase to $280 billion next fiscal year, Microsoft's free cash flow is expected to reach $78.6 billion. This could push its market value above $5 trillion, representing a 70% upside over the next two years. Analysts also see MSFT as undervalued, with an average price target of $490.11—around 10% above current levels.

Microsoft’s robust free cash flow makes it a strong retirement stock, offering long-term growth in dividends and stock price. The company is a big AI player and has benefitted from the AI wave, which may continue. We expect it to offer excellent growth and prove to be one of the best investments among the Magnificent Seven stocks.

5. Chevron

ChevronChevron, a leading oil and gas company, consistently generates substantial free cash flow. In 2022, Chevron produced nearly $38 billion in FCF, and in Q4 2023 alone, it generated $8.1 billion, achieving a strong FCF margin of over 17%.

This financial strength enabled Chevron to raise its dividend by 8% in 2024 to $6.52 per share, offering a 4% dividend yield. With projected sales of $200 billion this year, Chevron is expected to generate $33.8 billion in FCF—more than enough to cover its $12 billion dividend commitment, which accounts for just 36% of its total FCF.

The company has faith in its stock as proven from the $75 billion stock buyback program, allowing up to $20 billion in annual repurchases. This represents a potential buyback yield of over 7% based on its $256 billion market value.

Chevron’s consistent 37-year track record of annual dividend increases, along with its robust cash flow, makes it a top choice for income investors. Analysts see further upside in its stock price, positioning CVX as one of the best long-term retirement stocks.

Additional Picks from Vijay Marolia

We also have some top picks from others, including Vijay Marolia, the Managing Partner and Chief Investment Officer of Regal Point Capital, who shared these picks in an interview with CNBC:

1. Wheaton Precious Metals

Marolia recommended Wheaton Precious Metals, citing the company’s unique business model as a lender to mining companies rather than a miner itself. He believes the world is in the early stages of a long-term bull market in precious metals, which positions Wheaton for future gains.

Marolia also noted that inflation and the U.S. fiscal situation will further benefit precious metals investments.

2. Blackstone Group

Blackstone Group, an alternative asset manager, was another of Marolia’s top picks. He described the company as “smart and solidly consistent” in private equity, with strong borrowing capabilities and a history of successful deal-making. These factors contribute to Blackstone's long-term potential in generating attractive returns.

Marolia praised Blackstone's ability to improve operations and divest non-performing assets as key reasons for its long-term appeal.

Some other top names to consider by the team at Retirement Download

• In addition to Microsoft, you can consider investing in Meta.

• In addition to Chevron, you can consider investing in General Motors.

• In addition to Kenvue, you can consider investing in Eli Lilly.

• In addition to Starbucks, you can consider investing in Dominos.

Furthermore, diversify more but consider investing in other sectors such as payment gateways (PayPal and Mastercard) and travel (such as Airbus and Expedia).

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Nothing in this newsletter is financial advice. Always do your own research and think for yourself.