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6 Great Stocks for Retirement Savers

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The stock market has everyone scared right now. If you're trying to get rich, though, you still need stocks in order to succeed. It's just more important than ever to make sure you pick the right ones.

Words that will doom your finances
Many people are questioning the long-held belief that stocks are the best way to make money in the financial markets, with a well-worn argument: "This time, it's different." A decade of flat returns for broad market measures like the S&P 500 certainly bolster that argument, as anyone who put their money in even simple bank CDs has dramatically outpaced the overall stock market. Gold, a historical safe haven in times of turmoil, has quadrupled from its lows a decade ago, and investors have responded to that uncertainty by buying up shares of precious metals investments like specialized gold ETFs. The SPDR Gold Trust (NYSE: GLD  ) holds almost 42 million ounces of gold worth more than $50 billion.

Believing that history won't repeat is a dangerous position to take, though. According to research from Jeremy Siegel, a 10-year period where stocks trailed bonds is far from unprecedented: It has happened about 20% of the time. Over the length of a typical worker's career, 30 years or more, stocks have always done better. And with bonds on top of the world while stocks are stuck in the doldrums, do you really think that an investment in bonds today is going to do better than money put in the right stocks?

Get the stocks you need
For money you can invest over a fairly long time horizon -- that is, money you don't need within the next five to seven years or so -- you should concentrate on stocks and other higher-risk, less conservative investments. You can afford to weather the occasional market storm with this money, as we've seen with 2009's big gains after 2008's staggering losses. You may not always end up a big winner with stocks, but you'll greatly increase your chances of maximizing your returns over an ultra-safe, low-growth portfolio.

What stocks should you pick, though? The simple way out is to use index funds or ETFs to give you broad, low-cost exposure to the overall market.

But if you'd prefer to take a stand on some particular stocks, I'd urge you to consider some broad trends that will develop in the coming decades. Here are a few.

1. Buy the essentials that people need.
Whether you think emerging markets will bring the next global boom or are simply overhyped, the rise of billions of people in emerging economies means one thing: More people are going to need more things. In particular, companies that produce raw materials that go into all sorts of necessities will be poised to profit in the decades to come.

For instance, Titanium Metals (NYSE: TIE  ) provides efficient materials for airplane production, which should see continuing gains as emerging economies become more travel-intensive and create an expansion in global transportation. The ETF United States Natural Gas (NYSE: UNG  ) is designed to track the price of futures contracts on natural gas, which could become a key to clean energy use in the future. Be careful here, as commodities are cyclical and this ETF in particular hasn't tracked the spot price of gas, but over time, natural gas holds a great opportunity for growth.

2. Grow old with your stocks.
Companies respond to demographic trends. The ones that do the best job can profit the most.

An aging population will need more health care, which supports not only obvious picks like Merck but also riskier plays. Dendreon (Nasdaq: DNDN  ) is well known for the ups and downs of its prostate cancer drug Provenge, but its huge reliance on that drug's potential success makes it more prudent to combine with other high-risk startups. Intuitive Surgical (Nasdaq: ISRG  ) is on the cutting edge of medical technology, with tools that surgeons can use to improve their results and be more efficient. As people need more medical services, stocks like these will help medical professionals provide them.

3. Stick with survivors.
Just because you should take risk doesn't mean you should take too much risk. It makes sense to balance risky plays like the ones above with some more secure picks.

Companies with a long history of paying ever-increasing dividends are a good place to round out your stock portfolio. Procter & Gamble (NYSE: PG  ) and 3M (NYSE: MMM  ) have each raised their dividends each year for the past 50 years. More importantly, each still has a strong stable of products that people use and rely on. That doesn't mean you can buy them and forget about them, but you don't necessarily have to keep an eye on them as much as you might with less established companies.

Get going!
Stocks will play an important role in whether you can retire rich. If you get off on the right foot, you'll have the best chance to have the retirement of your dreams.

Tune in every Monday and Wednesday for Dan's columns on retirement, investing, and personal finance.

Fool contributor Dan Caplinger ain't afraid of no ghosts, or a falling stock market either. 3M is a Motley Fool Inside Value recommendation. Intuitive Surgical is a Motley Fool Rule Breakers selection. Titanium Metals is a Motley Fool Stock Advisor pick. The Fool has opened a diagonal call spread position and written puts on United States Natural Gas. The Fool owns shares of Procter & Gamble, which is a Motley Fool Income Investor selection. Try any of our Foolish newsletters today, free for 30 days. The Fool's disclosure policy doesn't have to worry about retirement; you'll find the Fountain of Youth in its Duke Street penthouse.


Read/Post Comments (8) | Recommend This Article (62)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 26, 2010, at 5:22 PM, Mstinterestinman wrote:

    RSG,KO, And JNJ are three more companies the risk averse should look at.

  • Report this Comment On July 26, 2010, at 6:03 PM, goalie37 wrote:

    While I agree with the article, I would like to point out that out "flat decade" started with a stock market bubble. To say that stocks have gone nowhere should be replaced by the knowledge that we have come all the way back from those overpriced days. In that decade we have seen two crashes. To be where we are now is very impressive. In addition, any active investor who bought during those crashes is doing pretty darn well about now.

  • Report this Comment On July 27, 2010, at 8:13 AM, Gregeph wrote:

    I've got some good links on my blog to posts that Exxon, Johnson & Johnson, EBay (per Vitaliy Katsenelson) and Google are undervalued. I also have a link to David Einhorn's Q2 letter where he makes the case that Apple, African Barrick Gold, Ensco and NCR are good buys. http://gregspeicher.com/?p=673

  • Report this Comment On July 27, 2010, at 12:07 PM, MarkGillCPA wrote:

    TIE and UNG? You make good points in your article and then your first two picks are TIE and UNG? TIE sells for 37 times 2011 EPS estimates, an EV/EBITDA ratio of 36.5, has an ROIC of 2.8%, is highly cyclical, and just hit a 52 week high. If anything, it's more of a sell here than a buy. It was a buy back in March, 2009 at $4 a share. And UNG is one of the most poorly constructed EFTs out there. It gets hit everytime it needs to roll its contracts. If you want to invest in Nat Gas, either buy the futures contract, or buy a nat gas stock like Devon, CHK, or Ultra Pete.

  • Report this Comment On July 27, 2010, at 3:11 PM, RobertM2282 wrote:

    I didn't know if I was reading correctly when I saw UNG mentioned as a stock (ETF) to buy. This horrible ETF has had a longtime propensity to decline in value as it needs to roll over its purchase to the more expensive nearby contract month. This is designed to be a very short term (think days) super speculative ETF, and it has handed investors huge, continuous losses. I hope the author of the article edits it out.

  • Report this Comment On July 30, 2010, at 10:59 PM, philkek wrote:

    Thanks MF and fellow fools for the education I get in reading this article and comments. Of investment symbols listed here GLD interests me most. TIE and UNG might have tempted me to buy them until I read comments by two fools smarter than me sounding a warning about them. Better Business Bureau warns people to Investigate BEFORE You Invest. I will do further research on all symbols mentioned here before I invest my hard earned money. Thanks again. Fool on for profits.

  • Report this Comment On July 31, 2010, at 3:13 AM, stockmover wrote:

    "I didn't know if I was reading correctly when I saw UNG mentioned as a stock (ETF) to buy. This horrible ETF has had a longtime propensity to decline in value as it needs to roll over its purchase to the more expensive nearby contract month. This is designed to be a very short term (think days) super speculative ETF, and it has handed investors huge, continuous losses"

    You are absolutely correct RobertIM2282 regarding the UNG ETF! This ETF has lost investors countless money over the past year

    This ETF should only if EVER be bought by day-traders trading on an hour by hour if not minute by minute basis and closing out their entire at the end of each day.

    I agree with Robert that you Dan Caplinger should rescind your inclusion of UNG in this article so it does not take it's toll on unsuspecting investors especially folks who are retirees !!!

    .

  • Report this Comment On August 01, 2010, at 10:38 AM, MNaggie wrote:

    UNG is a horrible investment that keeps showing up in Fool article's as a recommendation. Several other posters have mentioned this as well. Contango ruins UNG's performance. The only way to benefit from owning spot gas is to own the companies that own the gas! Devon is my favorite.

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Dan Caplinger
TMFGalagan

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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