RobertPowell

Imagine an investment portfolio that keeps pace with your expenses in retirement. Well, that’s what we asked experts to help us build—a portfolio comprising stocks and ETFs that represent the expenditures of those age 65 and older.

As some might recall, the 65-plus crowd spends on average 35% of their income on housing, 14% on transportation, 13% on out-of-pocket health care, 12% on food, 5% on entertainment and 3% on apparel. In addition, they spend 17% on average on other types of expenditures, including those for alcohol, personal care, reading, education, tobacco, miscellaneous items, cash contributions to persons or organizations outside their household, personal insurance, pension contributions (1%), and Social Security payroll taxes (3%).

So, the idea is this: Invest in such a way that your portfolio keeps pace with your expenses. So what sort of things might you invest in given those expenses?

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Chris Pavese, the president and chief investment officer of Broyhill Asset Management, a North Carolina-based private wealth management firm, suggests taking a look at Two Harbors Investment Corp. TWO, +0.87%  , especially since the stock has fallen hard on concerns that the Federal Reserve will begin tapering its quantitative-easing program this year.

According to Pavese, Two Harbors is a mortgage REIT, but unlike most of its competitors, the company is invested in both agency and non-agency mortgage securities. “The non-agency space has been a large theme of ours in recent years and offers an attractive risk-reward relative to other housing plays, in our opinion,” he said.

After the recent correction, Pavese said. Two Harbors trades below book value and yields north of 12%. He also noted that Two Harbors’ existing portfolio is leveraged to an improving housing market and management has recently received approval to invest in Mortgage Servicing Rights which is a “nice hedge” to the existing book. “We like management here a lot and have confidence in their ability to capture a number of developing opportunities in the space,” said Pavese.

Meanwhile, Vahan Janjigian, editor of the Money Masters Stock Report and chief investment officer of Greenwich Wealth Management, suggests that now would be a good time for retirees to buy a house. “I actually think this is a particularly good time to buy a home,” Janjigian said. “Thanks to the collapse of the housing bubble, home-price appreciation since 2000 is now back to the long-term trend. And despite the recent uptick in interest rates, mortgage rates are still extremely low on a historical basis.”

For example, Janjigian said the 10-year Treasury was yielding about 15% back in the early 1980s, yet people were still borrowing money and buying homes.

One way to play real estate is through the Vanguard REIT ETF VNQ, +1.74% which tracks the MSCI U.S. REIT Index. The Vanguard REIT invests primarily in commercial REITs, but it also has about a 17% exposure to residential REITs.

Consider Danone DANOY, -0.31% which Broyhill has owned for some time. As noted in this post from Pavese in March, “the stock has favorable geographic exposure (52% emerging market), favorable product lines (growth forecast in the high single digits), and is cheap (trading in line with slower growing peers and slightly below its own historical levels.”

More recently, as Nestlé NSRGY, +0.89%  has underperformed relative to Danone, Pavese said, Broyhill has begun increasing its position in Nestlé. “Both firms are similarly positioned in growing emerging markets, both boast strong brands, have defensive characteristics and attractive dividend yields,” Pavese said. “The combination of the two provides investors with a good mix of very high quality businesses in the food sector.”

Janjigian likes J.M. Smucker Co. SJM, +1.19%   despite the stock’s recent strong performance. “Many consumers are familiar with the company’s food brands, including Smucker’s fruit spreads, Jif peanut butter, and Crisco shortening,” Janjigian said. “They may not realize, however, that the company’s largest and most profitable category is coffee.” Smucker’s owns Folger’s and it also licenses the Dunkin’ Donuts brand for sale in grocery stores, he noted.