This week on the One Minute Retirement Tip podcast, I’m exploring the question: Are Value Stocks Coming Back In 2021?

Today, I’m talking about why value stocks are especially attractive for those of you who are close to retirement. If you’re needing to turn on an income stream from your portfolio and you’re worried about all the inflation headlines plastered all over the news, value stocks are the way to go. 

If we have inflation and higher interest rates, I would expect value companies to do very well in that environment. Most high-quality value stocks are characterized by the following: 

• Low debt
• Strong cash flow 
• Consistent profitability
• Dominant businesses in their industry
• Well-managed
• Pricing power to increase prices if inflation hits without losing customers

When a business has low debt and pricing power to increase prices without hurting their bottom line, like many value stocks have, the company can weather the inflation impact. When they have low debt, their interest and debt service costs won’t skyrocket and endanger the business when rates start increasing. 

As a result, high-quality value stocks will be even more attractive to invest in if inflation and higher interest rates kick in, which is a trend that appears to already be underway. 

The bottom line is that if you’re close to retirement and worried about inflation, you’re definitely going to want to own a substantial part of your retirement portfolio in high-quality value stocks. 

I’ll talk more tomorrow about the dividend component of value stocks that make them especially attractive investments for retirees. 

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the One Minute Retirement Tip.

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