Volatility Proofing Your Portfolio In Retirement

Now, how can we do that last part?

1. Make friends with dividends. Remember that market volatility often has little to do with a company's business fundamentals. In times of panic, a company's stock price might drop steeply even though nothing (or nothing much) has changed with its underlying business.

If your retirement plan has you selling shares no matter where we are in the business cycle, you could be in trouble. But with the right batch of investments, you could still count on income from dividends no matter what the markets are doing.

That's partially because a lot of companies are committed to making dividend payouts year-in and year-out. Of course that doesn't mean that they will always be able to do so, but if they have a history of it--and there are plenty of firms out there that have increased their dividend payouts every year over 20, 30, or even 50 years running.

Shall we name some names? Coca-Cola (KO, forward yield 3.5%) has paid out increasing dividends for 57 consecutive years. ExxonMobil (XOM, forward yield 4.15%) has done so for 36 years. Altria (MO, forward yield 6%), 49 years.

That's the beginning of an industry-diversified, income-producing portfolio right there. But if you're not into picking stocks yourself, there are well-diversified, low-cost mutual fund and ETF options that can get you a portfolio yielding 4% or so with no trouble at all--and with some dividend growth too:

Invesco S&P 500 High Dividend Low Volatility (SPHD, yield around 4%). Big dividends and low volatility? It may sound too good to be true, but it's not. This 50-stock ETF portfolio is pretty close to a one-stop shop for domestic dividend investors, and its fees are low for an actively managed fund.

Vanguard Global ex-US Real Estate (VNQI, yield around 4.25%). This fund carries some emerging-markets risk, but with that risk comes opportunity for growth, all with a relatively big yield and of course Vanguard's ridiculously low fees.

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