Retirees, beware.
These are the stocks that anyone in, or going into, retirement should avoid according to experts.
Tesla
Tesla Inc. is a fan favorite of Elon Musk devotees, but it may be too volatile for retirees.
So much potential, but not enough certainty about the future gives it too much risk for a retiree to consider, says John Thomas, the chief investment officer at Global Wealth Management. For instance, Wall Street remains concerned about Tesla’s cash position and production potential.
Perhaps retirees should just settle for buying a Model 3 if they want to get in on the Tesla excitement.
General Electric
Stay away from General Electric Co. Its shares have fallen more than 50% in the past year. While the company may be on its way to recovery, it’s too volatile for retirees to depend on.
Don’t be tempted by the dividend. Too many liabilities and not enough growth potential to make up for it, said Thomas.
“Retirees tend to focus on dividend payers, since they need income. There’s one dividend payer that most retirees own but should reconsider: GE. Under the reign of Jack Welch and his successors, General Electric was an unholy partnership between big government and big media. We’re finally seeing it play out now—a tragedy of paper money, financial speculation and excessive greed. Since the mid-’90s, GE has had far less to do with light bulbs, locomotives, or power plants than being involved in a gigantic financial gamble. That went for decades—right under the nose of shareholders. The SEC is now investigating the company’s accounting, and GE could easily become the next Enron or Lehman,” said Alexander Lowry, professor of finance at Gordon College.
Lowry continued, “In short, this beloved ‘industrial’ firm used financial sleight-of-hand to generate “earnings” and hit its targets, quarter after quarter, for decades. This is the same playbook the folks at Enron used. GE simply had many more assets to play with – and substantial influence in Washington, D.C. —so it was able to keep the game going much longer. However, despite what you may have heard about a turnaround under the company’s new CEO —a return to its industrial ‘roots,’ if you will—serious problems remain. Be very cautious about this stock.”
FAANG Stocks
Everyone loves FAANG, but retirees shouldn’t.
While FAANG stocks may be great for millennials and other investors who are looking to make money off of which ever company hits $1 trillion first, it’s not great for any investor who’s building a portfolio.
Michael Tanney, co-founder of Wanderlust Wealth Management, cautions that this late in the economic cycle and with a recession probable within the next couple of years, retirees should not reach for additional yield or famous high-growth names such as the FAANG stocks—Facebook Inc., Apple Inc., Amazon.com Inc, Netflix Inc., or Alphabet Inc.’s Google.
“Focus only on the highest-quality value companies, which have robust balance sheets, reliable dividend growth, and fundamental business models that are solid even during the deepest of recessions, such as Walmart, Dollar Tree, etc.,” said Tanney.
