Dividend-paying stocks are a worthy destination for retirees’ equity portfolios, writes Christine Benz for Morningstar, but if you ignore breadth and diversification you do so at your clients’ risk.
“Retirees shouldn’t reflexively avoid categories like small caps and international with the assumption that they’re too risky,” according to Benz.
On that note, Benz highlights three foreign funds that may be low enough risk to fit in your clients’ equity portfolios.
- Artio International Equity II. This portfolio, Benz writes, has a 6 percent stake in Russia, compared with averages for the foreign large-cap category of less than 1 percent. It lost a lot in 2008, but a large cash pool helped shield it from the heavy losses other foreign funds suffered.
- Scout International. A “tried and true” fund, according to Benz, this fund’s manager focuses on market-leading large caps and keeps turnover low. As a result, returns were in the top quartile in 2008 and 2009.
- Tweedy, Browne Global Value. This fund hedges foreign-currency exposure, protecting retirees from wild swings in value. Furthermore, the fund focuses on inexpensive stocks from developed markets to help beat down volatility, according to Benz.