Key takeaways:

• Retirees can remain active in the market via income-generating stocks and A+ investment set-ups, while extreme care should be taken if trading or holding more speculative stocks

As we enter our retirement years, naturally our appetite for risk changes. This is typically due to the fact that we prioritise some sense of stability and certainty in our lives, as we seek to preserve enough capital to sustain our lifestyle, and that of our family. 

But does that mean you should stop investing? 

If you ask most experts, they'd say otherwise. Of course, circumstances will vary from one individual to the next, but in most cases, advisers might suggest you review how active you are in the market, finetune your investing strategy, and rebalance your portfolio. Follow these steps, and there may be little reason to exit the market.

Learn more about rebalancing your portfolio here.

With the above in mind, here are three options for investors and traders to remain active in the market during retirement.

Income-Generating Stocks

We all know that dividends and franking credits are one of the preferred investment choices for retirees across the country. 

You only need to look at the reaction generated any time there is a suggestion about changes to franking credits to understand that millions of Australian investors look to dividends as an integral part of their investment strategy, either as means to support their lifestyle, or to provide passive income, among other reasons.

As such, retirees often look to hold stocks that deliver a high income yield. Among Selfwealth boomer' member cohort, stocks like Fortescue Metals Group (ASX: FMG), BHP (ASX: BHP), Commonwealth Bank (ASX: CBA), and a host of other high-yield names are among the most popular investments.

Many investors view dividends as a convenient way to earn income while you wait for a stock to rise. Not only do you have the opportunity to increase your capital over the long-term, but the regular distribution of dividends, which sometimes increase in value over time, provides some safeguard and stability against short-term volatility in the market. 

For retirees, this income stream is often used for reinvestment purposes, to invest in other holdings, or to support one lifestyle. The key is to find dependable stocks that have a consistent history paying, or increasing dividends over time. 

Understand how to identify shares paying sustainable dividends.Should you participate in a dividend reinvestment plan?

A+ Investment Set-Ups

Being active in the market doesn't mean you need to be active in the market. Sometimes, less is more. After all, the more frequently you enter a new trade, the more risk you take on. 

Naturally, some of this risk may be mitigated through due diligence and research, however, other times external events can interfere with your investment thesis and dictate the outcome. For these reasons, retirees may want to wait for the opportune moment when it comes to making a trade or investing in a stock. 

Ironically, the boomer' category was the most active on the Selfwealth platform in 2022, but there was an inverse correlation between trades made, and the proportion of buying activity that made up all trading. That is to say, on a relative basis, this cohort was selling more than other cohorts.

However, the key point here is the nature of the trades made. Most experts would generally suggest that retirees avoid day trading or having too many positions open. In this respect, higher selling across the Selfwealth boomer' category suggests some degree of risk awareness.

One of the ways that retirees may seek to tap into investing opportunities is by taking advantage of the cycles in the stock market. A big part of this is underpinned by technical analysis, including the belief that history tends to repeat itself.

You can learn more about technical analysis here.

With this approach, ideally you want to look for opportunities in high-quality companies trading at suppressed levels, and with market support on their side. An understanding of technical analysis will help you look for A+ set-ups, but if technical analysis is not your thing, fundamental analysis can also help you identify stocks that may be trading at a discount'.

Here are three simple ratios to value shares.

Trading with Risk Capital

Most advisers caution retirees about the risks associated with active trading during retirement, and that it may be unwise to invest in, or trade, speculative stocks. Despite this advice generally being considered accepted practice, we do know that some investors like to retain modest exposure to more risky' or volatile names during their retirement years. 

But there are significant risks in holding more volatile stocks during your retirement. For starters, you have a shorter investment horizon to recover any losses. Secondly, greater volatility will make it harder to plan your retirement and lifestyle funding needs. Thirdly, should you need to draw down your portfolio for an unexpected expense, large swings in volatile holdings could be problematic. 

Nonetheless, if you do feel compelled to take on some risk, it is prudent that only a small portion of your investment portfolio is assigned to more risky holdings, and diversification should play a central role in your portfolio. Furthermore, trading in more volatile holdings should only be done with risk capital', which is what you can absorb as a loss in the event that your trades don't turn out as expected. Learn about portfolio diversification here. 

Remember, putting all your retirement money into the stock market is ill-advised. It is important for retirees to preserve the majority of their capital for more stable investments, with no more than a minor portion of capital ever assigned towards more risky assets, or risky practices like day trading.