Q: I just opened an IRA and made my first deposit. What are some good stocks for my first investments?
The main idea with IRA investing is that you want stocks that will grow steadily over the years, so you can take advantage of the tax-free compounding power of retirement accounts. Stocks with a long history of dividend growth are a good place to start.
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One excellent example is AT&T (NYSE: T). The telecom giant's shares aren't likely to skyrocket, but it does have a history of steady growth over the years, and excellent potential for revenue growth going forward, thanks to recent acquisitions and technological advances in mobile communications. In addition, the stock pays a 5.2% dividend yield, and the company has increased its payout for 32 consecutive years.
Wal-Mart Stores (NYSE: WMT) is another one of my favorite retirement stocks. For starters, Wal-Mart is not only recession-resistant, but it actually tends to do better in tough times. In fact, during 2008 -- one of the worst years for the stock market in history -- Wal-Mart's business thrived and the stock gained 20%.
In addition, Wal-Mart seems to be one of the only retailers willing to directly compete with Amazon in the e-commerce space, and it has the financial flexibility to make strategic acquisitions to that end. In short, Wal-Mart's business model works in any economic environment, and the company's management is being very proactive to ensure it stays that way.
These are just a couple of examples, but you can apply the principles mentioned here to other stocks. Look for consistently growing revenue and dividends, and business models that work no matter what the economy is doing. If you do this, you can build an IRA that has the potential to grow a big retirement nest egg for you.
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