With the Fed’s return to a more dovish posture, retirement-age investors are dealing with numerous challenges while searching for income sources, according to the latest E-Trade quarterly tracking survey of experienced investors.
Interest-rate risk is an especially growing concern for Baby Boomers, with 33% of those surveyed indicating they were actively managing interest-rate risk in their portfolios, up six percentage points since last quarter, E-Trade said in an announcement Tuesday.
Retirement-age investors are shifting towards dividends in their search for income, the firm pointed out.
Asked if they were shifting their investing strategies toward various tactics amid the Fed’s accommodative posture pause in rate hikes, 40% of investors 55 and older cited dividend-paying stocks in the current/third quarter, although that was down from 57% in Q2, E-Trade said.
The firm noted that the latest wave of its survey was conducted July 1-11 among an online U.S. sample of 908 self-directed active investors who manage at least $10,000 in an online brokerage account.
Trailing dividend-paying stocks were fixed income (16%, down from 23%), money market funds (14%, down from 22%), CDs (14%, down from 17%), real estate investment trusts (12%, down from 16%), property/real estate (7%, down from 12%), annuities (5%, down from 10%) and master limited partnerships (flat at 3%).
When asked what risks they were actively managing with their portfolios, 46% of those investors cited market volatility in the current/third quarter, up from 45% in Q2.
Behind market volatility were interest rates (33% in Q3, up from 27% in Q2), political instability (30% in Q3, down from 33%), a potential recession (23%, down from 21%), inflation (flat at 17%), potential armed conflict, war or terrorism (14%, up from 6%) and a flattening/inverted yield curve (14%, down from 21%).
The healthcare sector continues to be seen as an area for opportunity as 58% of Boomers said the traditionally defensive and dividend-heavy health care sector has the most potential this quarter, up three percentage points since last quarter, E-Trade said.
“Investors approaching retirement traditionally turn to bonds to provide a steady stream of income for their portfolio,” according to Mike Loewengart, vice president of investment strategy at E-Trade Financial. “