Unfortunately, as we all witnessed in 2008, the market can take even the safest-seeming portfolio and drastically reshape it in a matter of days.

But the worst part about the recent recession is that it's causing investors do the exact opposite of what they should be doing, and it could end up costing you the comfortable retirement you've always dreamed of.

The unfortunate reality
According to a 2009 survey, about 50% of retirees feel less financially secure than they did when they entered retirement. Among other things, they're worried about the economy, inflation, a change in housing prices, and their ability to recover from the economic downturn.

So what has the response been from baby boomers, who are entering retirement now? They're flocking to safety, which usually means shifting assets from stocks to bonds or keeping equity positions relatively conservative.

But even though investors in or close to retirement should shift some of their assets to more conservative positions, that doesn't mean they should eschew the better returns they could get elsewhere in the market.

A small caveat
Now, I'm not talking about going out and buying shares of First Solar (Nasdaq: FSLR) or Sirius XM Radio (Nasdaq: SIRI), both of which operate in uncertain industries.

Don't get me wrong: First Solar is a great company. It has a clean balance sheet and is an aggressive cost competitor. But solar is a heavily subsidized market, and if I were near retirement, I wouldn't want my money tied up in an industry that may take years to materialize.

And while Sirius XM is a great turnaround story, it trades for 55 times next-year earnings and is heavily dependent on the recovery of the auto industry. Sure, there's room for growth, but Sirius's present price tag may be a bit too rich for the potential reward.

These companies and others like them are extremely volatile. And while volatility and risk aren't always the same thing, they aren't the best place for your money if you have a shorter time horizon.

The best stocks for you
If you're close to retirement, your investing philosophy should revolve around the following features:

  • Hefty dividends: If you're like most people, you probably need incoming revenue to help pay for day-to-day expenses. Fortunately, even after 2008, there are still plenty of stocks that pay you nicely to hold shares of their companies. The best ones grow their dividends regularly -- giving you a hedge against inflation.
  • Attractive valuations: You never want to pay more for a stock than you have to, and that's even more true with a shorter time horizon. Stocks with lower valuations give you a larger margin of safety and help ensure you're getting the best deal possible.
  • Earnings Growth: Many investors think that if you buy dividend stocks, you have to sacrifice your shot at gaining capital appreciation as well. However, that's definitely not true -- you should always buy companies that can provide growth as well as income.
  • Low Volatility: Stocks that swing up and down like a see-saw can give us motion sickness. With less time to play around with, buying stocks with low volatility, or beta, will let you sleep better at night.

So what are the top five stocks to buy today, that encompass the above criteria? Let's take a look:




20-Year Growth


Eli Lilly & Co. (NYSE: LLY)





Altria Group (NYSE: MO)





Johnson & Johnson (NYSE: JNJ)





Unilever (NYSE: UL)





General Mills (NYSE: GIS)





*Compound Annual Growth Rate.

Each of these companies trade for reasonable valuations, will pay you to hold them over the long-haul, and won't gyrate wildly -- so you can rest assured your portfolio won't be turned upside down. Even better, they've proven that they can offer capital appreciation as well.

The foolish bottom line
You should always have some of your capital allocated to fixed income and cash; but having all your money in near risk-free investments just won't cut it, especially as we experience some of the lowest interest rates in years. The combination above of current income, potential dividend increases, growth, and low volatility is one that should weather any storm.

That's why at Motley Fool Income Investor our analysts look for stocks just like the ones above. Our team knows that there are plenty of stocks that combine the best of both worlds -- both income and growth -- and that it only takes patience, due diligence, and some hard work to find them. And since 2003, their attentiveness to the market has paid off -- they're currently beating the S&P 500 by six percentage points.

If you're interested in seeing all of Income Investor's past and present recommendations, in addition to the five stocks you should "buy first," we're currently offering a free, 30-day trial. Just click here for more information -- no strings attached.

Fool contributor Jordan DiPietro owns shares of First Solar. First Solar is a Motley Fool Rule Breakersselection. Unilever is a Motley Fool Global Gains recommendation. Johnson & Johnson and Unilever are Motley Fool Income Investor choices. Motley Fool Options has recommended a buy calls position on Johnson & Johnson.. The Fool's disclosure policy is back on its feet after its second bear market.