It's pretty well accepted that an individual's risk appetite generally falls with age.
This makes good sense when you consider someone in their 20's has a lot more time to recoup their losses compared to someone in their 60's who is nearing retirement and will be reliant on their current nest egg to fund their future lifestyle.
Because capital preservation becomes increasingly important as we grow older, investors need to ensure they select shares that are consistent with their risk appetite and investing timeframe.
With that in mind, here are three shares that I think could be great additions to a well-balanced retirement portfolio:
WAM Capital Limited (ASX: WAM)
Led by Geoff Wilson, WAM Capital is an obvious choice for risk averse investors who still want exposure to the Australian share market. Not only do investors get access to a top performing fund manager, they also receive a healthy dividend pay-out which is currently yielding 6.1%. Importantly, the shares have a beta of 0.78 which means they are far less volatile than the broader market. WAM Capital's impressive long term performance is highlighted below:
Transurban Group (ASX: TCL)
Transurban shares have been surprisingly volatile over the course of 2016 as investors have re-rated the shares in light of rising bond yields in Australia and abroad. Despite this, I still believe the toll-road operator is a suitable option for income-seeking investors thanks to its reliable distribution growth.
With that said, it is crucial investors pay a reasonable price for the shares to ensure they are given a wide-enough margin of safety to protect them from further downside volatility. As a result, I think a share price of around $9.50 would be an attractive entry point and this could easily occur in 2017 should bond yields continue to rise.
CSL Limited (ASX: CSL)
Biotechnology companies are usually considered high risk investments, but I think CSL's market leading position and growth pipeline makes it one of the most attractive growth shares – even for conservative investors. Admittedly, the shares offer a relatively small dividend yield but this is more than offset by the prospect of significant capital gains over the next few years as a number of new treatments are commercialised. At under $100 per share, investors are offered a reasonable entry point and can sleep comfortably knowing their investment is unlikely to crash 50% on any given day.
