Here’s how I try to find the right stocks to buy for my pension

One reason I buy shares is to help build a pension pot for retirement. But it can involve complex decisions. After all, in the UK and US alone, there are thousands of stocks to choose from. Sometimes I’m tempted by the company and I think, “this is the best stock to buy for my pension?”

Actually, “the best stocks to buy” It does not mean that it will be the most useful for me in the future. After all, no one knows how the future will turn out, let alone last year. However, I assess stocks using some specific criteria.

Growth or income

For example, one of the choices I face as an investor is how to split my retirement between stocks that have a growth focus and those that are more income oriented.

Take my stake in a network of digital advertising agencies S4 Capital. It has never paid dividends and I don’t expect to receive one anytime soon (although if it makes a big profit in the future that could change). But I think the company can grow strongly. In the second half, like-for-like net revenue growth in the firm is expected to come in around 25%. It’s quite a clip.

In contrast, I may choose companies that I think have limited growth opportunities but are spending a lot of cash that can be paid out as dividends, such as cigarette manufacturers. Imperial brand. The manufacturer based in Bristol has a dividend yield of 6.9 %.

I have a lot of income stocks in my retirement portfolio, in part because they generate additional cash that I can use to buy more stocks. But if inflation remains high, the real value of these dividends may decline. Retirement planning involves a long-term perspective, so I expect periods of high and low inflation.

Risk tolerance

Sometimes I find what I think is a good stock to buy for my portfolio but decide it’s too risky.

Every investor’s risk tolerance is different. But I find it can be easy for me, especially when looking at the long term, paying attention to risk. Because I want to buy stocks with an investment time frame measured in decades, I feel confident that some bad mistakes will be canceled out by other options.

Indeed, some of the strong players in my portfolio can help offset some of the weak ones. Indeed, this is the thinking behind the main investment principle of diversification. But why put money into stocks that I think are quite risky?

Learn from Warren Buffett

I think the reason some investors do that is because they’re attracted to it.”high risk, high reward“situation. I don’t. As Warren Buffett said, the first rule of investing is “never lose money“- and the second rule is not to forget the first.

That’s why I try to avoid stocks that are attractive but too risky for my taste. One of the ways I do this is by focusing not only on maximizing my strengths, but also trying to limit my weaknesses. That’s why I try to find blue-chip companies that are consistently profitable with an attractive business model.