Investors in their 50s still have some time before retirement, but preservation of capital becomes increasingly important as the years pass. Having a risky bet go south may not be a big deal for younger investors, who have decades left in their working lives, but for investors in their 50s, a big loss could negatively affect retirement.
There's still room for taking some risk, of course, but safety should be a major concern. With that in mind, three of our Foolish contributors have found a few stocks that may make sense for investors in their 50s.
Jason Hall: The steel industry has been hammered (Pun? Sorry.) over the past year-plus:
Iron and steel prices globally have tanked, and much in the same way that oil prices have: too much product; too little demand. This situation has led to a number of different reactions, including some illegal ones by some state-owned steel industries in some parts of the world being propped up by their governments. The U.S. government implemented tariffs in 2014, but illegally subsidized steel continues to get imported into the U.S. at prices that some steelmakers just can't compete with.
And while this sounds like a terrible environment to invest in steelmakers, I think it makes for a good opportunity if you invest in the right steelmakers, such as Nucor Corporation (NYSE:NUE) and Steel Dynamics (NASDAQ:STLD).
What makes these two steelmakers exceptions? Their operations are better suited for the ups and downs of the cyclical steel industry, with steel mills and foundries which are much more scalable to meet fluctuations in demand. By having a more variable capital and operating structure, the companies have lower fixed costs that are hugely beneficial in downturns.
Second, both companies are well run by management teams that focus on operations and maintaining strong balance sheets:
Bottom line: Steelmaking is ugly today, but it will recover. Nucor and Steel Dynamics will navigate the downturn just fine and be huge winners when things eventually turn for the better.
Tim Green: Finding a balance between growth potential and preservation of capital is important for investors in their 50s. High-flying growth stocks may be fine for younger investors, but big losses need to be avoided for those in the final stages of their working lives. I think one of the best options for investors in their 50s is Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B), a conglomerate with an unparalleled track record headed by legendary investor Warren Buffett.
Berkshire consists of dozens of separate businesses spanning a broad swath of industries, as well as an investment portfolio valued at over $100 billion. The company generated nearly $200 billion in revenue and about $20 billion in net income in 2014, making Berkshire one of the largest companies in world measured by either revenue or profit.
From 1965 through 2014, Berkshire's per-share book value has grown at a compound annual growth rate of 19.4%, while its per-share market value has grown at a faster 21.6% annual rate. For comparison, the S&P 500 index, including dividends, has grown by only 9.9% annually. While past performance doesn't guarantee future performance, Berkshire's track record is impressive.
Buffett won't be around forever, but Berkshire is positioned well for the future. The company's businesses include Berkshire Hathaway Energy, which operates a variety of energy companies, Burlington Northern Santa Fe Railway, one of the largest railroads in North America, various insurance companies such as Geico and General Re, and dozens of other companies big and small. Berkshire buys companies that have built sustainable competitive advantages, ensuring that they generate ample cash for Berkshire to invest for decades to come.
George Budwell owns shares of Berkshire Hathaway. Jason Hall owns shares of Berkshire Hathaway. Timothy Green has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway. The Motley Fool recommends BioMarin Pharmaceutical and Nucor. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.