May 15

Value Investing for Retirement: Building a Safe Portfolio

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In the journey toward a secure retirement, your investment strategy serves as the vehicle that will carry you to your destination. While many approaches exist, value investing offers a time-tested path particularly well-suited for retirees and pre-retirees seeking stability, income, and reasonable growth. As Warren Buffett has demonstrated over decades, focusing on undervalued assets with strong fundamentals can lead to exceptional long-term results—exactly what a retirement portfolio needs.

This article explores how value investing principles can help you build a retirement portfolio designed to weather market storms while providing the income and growth necessary for your golden years.

Why Value Investing Makes Sense for Retirement

Retirement investing presents unique challenges. You need growth to combat inflation, income to fund expenses, and stability to sleep at night. Value investing addresses all three concerns:

Downside Protection When You Need It Most

"Recency bias causes investors to forget how quickly markets can turn—a particularly dangerous situation for those approaching retirement age who may be drawing from their portfolios rather than contributing," notes financial advisor Tom Dupree19. Value investing's focus on buying assets below their intrinsic value creates a built-in "margin of safety" that helps protect against severe market downturns.

Income Generation Through Dividends

Since 1900, dividends have accounted for approximately 45% of the total return for the S&P 500 Index. For retirees, these cash payments provide crucial income without forcing asset sales during market downturns.

"Dividend-paying stocks typically experience less movement overall (also known as 'beta'), which means they are likely to hold up better during downturns," explains Cabot Wealth Network. This stability is precisely what retirement portfolios need.

Long-Term Growth Potential

While safety is paramount, retirement can last 30+ years, requiring continued portfolio growth. As Schwab's Rob Williams explains, "when you need your savings to last 30 years or more, being too conservative too soon can put your portfolio's longevity at risk".

Value investing strikes this crucial balance, seeking reasonably priced assets with growth potential rather than chasing speculative high-flyers.

Building Blocks of a Value-Based Retirement Portfolio

1. Start With a Safety Buffer

Before deploying your value investing strategy, establish safety nets:
  • One year of spending cash in liquid accounts like money market funds
  • Two to four years of living expenses in short-term bonds or CDs
This buffer prevents forced stock sales during market downturns. Research shows that from the 1960s through 2021, the average bear market recovery time was roughly three and a half years. Your buffer ensures you can ride out these storms.

2. Core Value Stock Holdings

The foundation of your retirement portfolio should include value stocks with these characteristics:
  • Strong balance sheets with manageable debt levels
  • Consistent dividend history, ideally with regular increases
  • Reasonable valuations relative to earnings, book value, and cash flow
  • Durable competitive advantages protecting long-term profitability

"When a company pays a dividend—and especially if it makes an effort to increase that dividend every year—it shows that it cares about rewarding shareholders," notes Cabot Wealth. These shareholder-friendly companies with predictable business models tend to provide more reliable retirement income.

3. Diversification Through Value ETFs

Individual stock selection requires significant research. Value-oriented ETFs offer a simpler alternative, providing instant diversification across multiple value stocks.

Look for ETFs with:

  • Low expense ratios
  • Focus on quality value metrics beyond just price-to-book
  • Dividend yield higher than market average
  • Strong track record through different market environments

4. Consider a "Glidepath" Strategy

As retirement approaches, gradually shift toward more conservative allocations. The "glidepath" approach reduces risk as your time horizon shortens:

"When you are further out from retirement, the portfolio allocation is geared towards higher risk assets such as equities to help you accumulate and grow your wealth... As you move closer to retirement, risk is gradually dialled back by reducing allocation in higher risk assets and increasing allocation to fixed income funds"

The Hybrid Approach: Balancing Income and Total Return

Rather than choosing between growth or income, consider a hybrid approach. As Thornburg Investment Management explains:


"There are generally two schools of thought regarding how best to fund expenses in retirement... a total return approach... [or] a high-income approach... [Consider] a third approach, which is a hybrid of the total return and high-income approaches".

This hybrid strategy involves investing in stocks that provide both current income and the potential for dividend growth over time—precisely the profile many value stocks offer.

Implementation Steps for Your Value Retirement Portfolio

Step 1: Assess Your Income Needs

Calculate your required annual withdrawals, accounting for:
  • Essential expenses
  • Discretionary spending
  • Emergency funds
  • Inflation adjustments
A recent Indonesian study found a safe withdrawal rate of 5.38% for a diversified portfolio over a 25-year retirement horizon. However, your personal withdrawal rate should reflect your specific situation and market conditions.

Step 2: Create Your Value Stock Selection Criteria

Develop a screening process to identify value stocks, focusing on:
  • P/E ratios below industry averages
  • Dividend yields above market average
  • Debt-to-equity ratios below 0.5
  • Return on equity above 10%
  • Consistent earnings growth
  • Cash flow sufficient to cover dividends

Step 3: Implement Asset Allocation Based on Time Horizon

Your asset allocation between stocks, bonds, and cash should reflect your retirement timeline:
  • 10+ years from retirement: 60-80% value stocks, 20-40% bonds
  • 5-10 years from retirement: 50-60% value stocks, 40-50% bonds
  • In retirement: 40-60% value stocks, 40-60% bonds, with cash buffer

Step 4: Regular Rebalancing and Dividend Reinvestment

Set a schedule to review and rebalance your portfolio annually. During accumulation years, reinvest dividends to accelerate growth. In retirement, direct dividends to your spending account.

Avoiding Common Retirement Value Investing Mistakes

Mistake #1: Chasing Yield Without Considering Quality

High dividend yields can signal distress rather than value. Focus on sustainable dividends backed by strong fundamentals.

Mistake #2: Insufficient Diversification

Even value investors need diversification across:
  • Market sectors
  • Company sectors
  • Geographic regions
  • Asset classes

Mistake #3: Ignoring Inflation Risk

"One of the main goals of financial literacy is to ensure a financially sound retirement," yet many investors underestimate inflation's impact. Value stocks with growing dividends help address this risk by increasing income over time.

Gain Expert Guidance on Value Stock Analysis

Building a successful retirement portfolio through value investing requires skillful company analysis. To help you master this critical skill, join our upcoming webinar on "Step-By-Step Company Analysis" where you'll learn:
  • A deep dive into a fast-growth company case study.
  • The key financial metrics used when evaluating whether a stock has strong growth potential
  • Step-by-step guide on how to apply the Value Investing Methodology on real-life companies
  • The exact criteria that successful investors use when evaluating any company
  • How to determine the intrinsic value of a stock so you will know exactly when to enter or exit the market
  • How ViA Atlas Intrinsic Value (IV) Directory can get you started on building your own portfolio of superhero stocks, even for busy professionals without much time to spare.


The right knowledge and tools can help you create a retirement portfolio that provides income, growth, and peace of mind through value investing principles that have stood the test of time.

Scroll down below to register for the webinar.

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See Value Investing in Action

In this live session, you'll see a step-by-step company analysis demonstrated by Cayden Chang, founder of Value Investing Academy. 
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Presented by Cayden Chang

Founder of Value Investing Academy and Award-Winning International Speaker, Lifelong Learner Award 2008, Personal Brand Award 2017


You will learn:

  • A deep dive into a fast-growth company case study.
  • The key financial metrics used when evaluating whether a stock has strong growth potential
  • Step-by-step guide on how to apply the Value Investing Methodology on real-life companies
  • The exact criteria that successful investors use when evaluating any company
  • How to determine the intrinsic value of a stock so you will know exactly when to enter or exit the market
  • How ViA Atlas Intrinsic Value (IV) Directory can get you started on building your own portfolio of superhero stocks, even for busy professionals without much time to spare.


Click the button below to reserve your spot now.