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Why I would add Coles and this ASX share to my retirement portfolio

If you’re young and are just starting out with investing, you might focus on growth shares like Zip Co Ltd (ASX: Z1P) that offer potentially strong returns.

This is because, with time on your side, you can afford to invest in higher risk shares as you have the opportunity to recover your losses further down the line if things don’t go to plan.

But when you are approaching retirement, I feel your focus should shift to lower risk options that offer income and capital preservation.

With that in mind, I have picked out two ASX shares which I think would be great options for a retirement portfolio:

Coles Group Ltd (ASX: COL)

I believe this supermarket giant would be a fantastic option for a retirement portfolio. This is due largely to its solid long term outlook and defensive qualities. The latter has been on display for all to see this year during the pandemic. Coles looks set to deliver a very strong profit result later this month, which should put it in a position to increase its dividend nicely. I expect more of the same in FY 2021, especially given recent lockdowns, and for its growth to continue over the next decade and beyond. Another positive is its favourable dividend policy which sees it pay out between 80% and 90% of its earnings to shareholders. Based on the current Coles share price, I estimate that this will mean a 3.4% fully franked dividend yield in FY 2021.

Rural Funds Group (ASX: RFF)

Another top option for a retirement portfolio could be this agriculture-focused property group. This is because of the quality of its assets and its positive long-term distribution outlook. Thanks to its long-term tenancy agreements and periodic rent increases, I believe Rural Funds will be able to grow its distribution at a consistently solid rate long into the future. An added bonus is that it pays its distribution in quarterly instalments, providing investors with a regular source of income. In FY 2021 Rural Funds intends to pay an 11.28 cents per share distribution. Based on the latest Rural Funds share price, this equates to a 5.4% yield.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of June 30th

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED. The Motley Fool Australia owns shares of COLESGROUP DEF SET. 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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