Retirees have been conditioned to the notion that once they reach retirement age they must become completely risk-averse regarding their investing practices. Therefore, they end up holding portfolios full of fixed income with little or no growth of either income or principal. However, it doesn’t have to be that way. I believe that retirees can have their cake and eat it too. If they adhere to sound principles of investing, they can have safety, growth and an increasing income each year.
Ben Graham’s famous book, The Intelligent Investor, is considered by many to be the seminal work and authority on prudent investing. In Chapter 14 titled Stock Selection for the Defensive Investor, Ben Graham laid out seven quality and quantity criteria that he suggested for the selection of common stocks. These include:
1. Adequate Size of the Enterprise
2. A Sufficiently Strong Financial Condition
3. Earnings Stability
4. Dividend Record
5. Earnings Growth
6. Moderate Price / Earnings Ratio
7. Moderate Ratio of Price to Assets
Source: Guru Focus
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