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3 shares ideal for retiree portfolios

It’s often said that everyone’s last job is an investor. Tradies, accountants, managers, doctors, lawyers and so on all retire and then have to manage their retirement money.

The last thing most people want to do is start worrying about share markets in their retirement.

So, I’m not about to suggest retirees should put their money into the latest hot share like Afterpay Touch Group Ltd (ASX: APT).

Instead, those ideal investments should provide a pleasing level of income and be reliable dividend payers even if the economy were to get rough.

Here are three of my ideas:

Rural Funds Group (ASX: RFF)

Many retirees dream of leaving the big city behind and retiring to a farm. That idea may be good for the soul, but not such a great financial decision.

Why not invest in a farm real estate investment trust (REIT) instead? Rural Funds Group owns dozens of properties spread across many sectors like vineyards, cattle, cotton, almonds and poultry. It’s nicely diversified.

Farmland has been useful for many hundreds of years and with management predicting the distribution can grow by 4% per year for the foreseeable future, I think this could be solid core holding of a retirement portfolio.

It currently has a distribution yield of 4.8% for FY19.

WAM Research Limited (ASX: WAX)

I also believe that some investment managers provide funds that are both higher performing and relatively safer than the whole ASX index.

WAM Research is a listed investment company (LIC) run by Wilson Asset Management, one of the longest-running fund managers in Australia. Over the past five years this LIC’s portfolio has returned an average of 17.4% per annum before fees and expenses, soundly outperforming the S&P/ASX All Ordinaries Accumulation Index by 8.2% per annum.

However, it has managed to achieve this outperformance with a high level of cash. In the short-term there’s nothing safer than cash. Despite putting more cash to work in recent months, 23.3% of the portfolio was cash at the end of August 2018.

It has increased its dividend every year since the GFC and currently has a grossed-up dividend yield of 8.1%.

Challenger Ltd (ASX: CGF)

Many retirees are attracted to the idea of an annuity. It provides a guaranteed source of income for their capital. Challenger happens to be the clear market leader in this space and is expected to receive growing capital inflows due to a growing retiree population, growing superannuation balances and additional sales channels.

Share market investors could choose to invest in Challenger shares instead of getting an annuity. Similar to investing in bank shares instead of choosing a term deposit.

Challenger currently offers a grossed-up dividend of 4.7% and has increased its dividend each year since the GFC.

Foolish takeaway

In my opinion all three shares offer a good level of income, safety and growth which makes them well suited for a retiree’s portfolio, or indeed a regular investor – which is why all of them are part of my portfolio.

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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. The Motley Fool Australia owns shares of AFTERPAY T FPO. 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.

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