As Barbara Garbens' career has progressed, so, too, has her investing style.
Ms. Garbens, who has run her own financial planning firm, B L Garbens Associates Inc., in Toronto since 1998, has shifted her investments significantly in the nearly 30 years she's been a planner.
At first, her instruments of choice were guaranteed investment certificates, in their 1980s "glory days" when interest rates hovered near 10 per cent. When rates came down, she moved into mutual funds. Today, she prefers dividend-paying stocks with strong track records.
"When the market tanks, or there's a lot of volatility, I don't really care about my bottom line," Ms. Garbens says, "because the end result is I'm going to have income from the dividends that I plan to use as a cornerstone of my retirement income."
The income generated from dividend stocks makes them a worthwhile choice for any portfolio but especially for investors reaching retirement. A sector-balanced basket of these stocks will keep income flowing, providing protection even if one or more of the industries hits a downswing.
Ms. Garbens' advice for picking dividend stocks is tried and true: Look for blue chips across a number of sectors.
"I've moved into dividend-paying stocks that have a track record of having produced dividends annually for decades," Ms. Garbens says, "and increasing those dividends annually for decades."
Think telecommunications, energy, pipelines and financial institutions, she says, always with an eye toward diversification, letting the strong sectors pull up the weak ones when a sector or stock underperforms.
Dividend stocks can be a particularly good fit in non-registered – or, better put, non-tax-sheltered – accounts, she says, thanks to dividend tax credits.
Of course, these stocks have a snag – dividend growth during retirement can bump up an investor's net income, potentially leading to a clawback of Old Age Security benefits. When assessing dividend income for retirement, Ms. Garbens says, "you have to look at everything."
After starting her career as a bank teller, Ms. Garbens became a Certified Financial Planner in 1985, completing the requirements for the Registered Financial Planner designation in 1988. A decade later, she launched her own fee-for-service financial planning firm in Toronto.
The seas have shifted since she began saving and investing. GICs were great until interest rates dropped, and then she began to study mutual funds. Now, with retirement in mind, she has moved out of mutual funds because of their high costs.
Younger investors can also enter the dividend investing world, and they can do so with a bigger tolerance for market volatility, since more time will elapse before they need to access retirement income.
But Ms. Garbens reminds them that the key remains to invest in quality – "however that's defined to them, but something that has actually performed well over time. It requires a little bit of educating themselves and doing some homework."
More importantly, she says, it's important for younger investors to save at all, since many don't think about retirement until their 40s or even 50s. "If you don't have money to invest, you're not going to be a successful investor."