When deciding on the best moves for your retirement portfolio, you should insist on a combination of things. Obviously, you want a high degree of stability. A good dividend yield is nice, but more important than the yield itself is whether or not the company has a good record of raising the payout. What most advisors don't think is important (but I disagree strongly) is that you find your investments exciting and have significant growth potential.
However, don't go throwing you're retirement nest egg into Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) just yet. Far too often I read on message boards, "Buy all of the Apple stock you can and retire the way you want", or some variation of that statement. While I agree that if the market all of a suddenly behaves "rationally", Apple reinvents the wheel again, and all the earnings reports beat expectations, Apple could indeed double or even triple. However, if market behavior always made sense, we'd all be rich.
Tech stocks are one of the most exciting types of investments, and as I mentioned before, excitement definitely has a place in your portfolio. Apple and Google, and those like them, are best suited for discretionary money (read: money you can afford to lose). For your retirement cash, consider these alternatives:
1.) Intel (NASDAQ:INTC) - Perhaps my favorite retirement stock, period. Intel is well-known for being the largest manufacturer of microprocessors in the world. I also believe it to be undervalued, considering the amount of growth potential the company still has. The trend toward tablet and smartphone computing alone opens up a world of possibilities. Intel's Atom processor is competitive performance-wise in these segments, but as of yet, is not competitive in terms of battery life. Once they figure this challenge out, the sky is the limit. Of course, there is also that rumor swirling around about Intel becoming Apple's chip supplier for iPhones and other mobile devices. If that proves true, look out above.
In the meantime, Intel trades at just 10.1 times TTM earnings, which is even more impressive when taking into account the almost $20 billion in cash on the company's balance sheet. Intel yields 4.17% annually, and has raised the dividend every single year over the past decade.
2.) Seagate Technology (NASDAQ:STX) - This hard drive manufacturer sure has rebounded nicely since hitting a low of just $2.98 during the financial crisis. Currently trading around $32.50, Seagate yields 4.68% per year. While I agree that hard disk drive demand will slowly decrease over time, this creates a tremendous opportunity for industry leaders like Seagate. The company is developing a line of hybrid drives as an alternative, which will be smaller and more efficient than traditional drives, while being more cost-effective than solid-state drives.
3.) China Mobile (NYSE:CHL) - The largest mobile phone service provider in the world, China Mobile serves more than 584 million subscribers. As it stands right now, China Mobile is an industry leader with growth potential. In fact, over the past decade, CHL's revenues have risen from just over $15 billion annually to almost $85 billion annually. While the number of subscribers may not grow as fast as it has been, as Chinese consumers become more affluent, they will be able to upgrade to more expensive phones and services. To put it in perspective, China Mobile has a market cap of $220 billion, or $376.71 per subscriber. The U.S. leader, Verizon (NYSE:VZ), has 98.2 million subscribers and a market cap of $137.1 billion, or $1,396 per subscriber.
China Mobile is planning on launching 4G services this year, and if they can finally make a deal with Apple to carry the iPhone, it would be huge for investors. As it stands now, CHL trades at 10.9 times TTM earnings and yields 4%. Not a bad value for a company with so much untapped potential.
While Apple and Google are indeed exciting, there are better investments for your retirement fund. It is certainly possible that Google can skyrocket to $1,000 this year, as many analysts predict. It could just as easily drop back to $600 after a mediocre quarter. Are you willing to risk losing 25% of your retirement savings chasing a dream? You shouldn't be.