When you are young you often think of how to invest for retirement. The strategy commonly suggested is a mix of safe investments and growth stocks. As retirement approaches the idea is to increase the number of safe dividend stocks and reduce portfolio risk by getting rid of risky stocks. But, if your savings, pension, social security and other assets are not enough to let you do the things that you want, you need to find ways to make money in retirement. You can always go back to your old job and maybe you cannot because they outsourced it to Bangalore, India or Shanghai, China. Besides, the point of being retired is to have enough time to do some of the things that you always wanted to do. Our suggestion is to find ways to make money in retirement that do not require a full work day much less a full work week. When you invested for retirement you had a plan for how to invest in real estate, stocks, and your own business. Now, in retirement, is the time to look at how to rewrite that plan to make money in retirement using what you know and taking advantage of the time at your disposal.
Low Risk, Low Returns
Dividend stocks are still a good idea when you are retired. They send you a check every quarter, may appreciate in value and may increase dividends over the years. In looking at stock picks for 2014 we looked at a collection of utility stocks. We noted that if you wait until interest rates go up you can buy these stocks for less than they sell for now. This is because these companies to do not grow fast and their stocks are an alternative to bonds. Thus their dividends remain stable over the years and the value of the stock moves opposite to interest rates. When rates go up as the Fed cuts its stimulus program the rate of return on these stocks will go up as they will become bargains. Thus, a good way to make money in retirement is to buy utility and other dividend stocks when interest rates are high. You can hold these stocks forever or you can sell for a tidy profit when rates go down.
Speculative, Cheap and Potentially Lucrative
They say that a good way to avoid or slow the arrival of Alzheimer’s disease is to learn something new in your old age. If what you learn is all about high tech and bio tech growth stocks you can also make money in retirement. The money to be made in biotech is typically when a new company succeeds in getting FDA approval for a new drug. The hurdles put in place by the FDA are meant to make sure that a drug works as promised and that it does not have bad side effects. At first drugs are tested on animals and then they are tested in three phases on humans. At each step the price of the stock of the bio tech company may sky rocket if the drug passes. An investor does not need to invest a lot of money to make a lot with these stocks. It is largely a matter of timing. Buy a few shares well in advance of the announcement of results of phase one, two or three testing. Then sell when the stock bumps up in anticipation of good results. This type of investing takes time and patience that you have as a retired person. And you get to learn new things along the way. And, as always do your own fundamental analysis of investments and be wary of tips.