These Are The Kind Of Dividend Stocks To Own For The Next Recession

This stock market makes it difficult for me to write about undervalued sectors or nice conservative income stocks. With the stock market indexes and big name companies climbing to new highs every day, there is euphoria with investors who now believe the good times will keep rolling into 2020. They have so far through the first three weeks of the new year.

With so much positive news and opinion about the stock market, it goes against human nature to think about what happens when the market takes a tumble. Although it feels like it won’t happen in such good times as these, I want you to think about your plan if the stock market drops by 20% to 25%. (Note: In early February I’ll be giving a live presentation on how to sustain your income portfolio during a recession. Details here.)

Don’t think it can’t happen. Investors felt the same in the Fall of 2018 when the stock market was marching steadily higher and setting new all-time (for that time) records. Without warning, over the final four months of 2018, the major stock market indexes dropped by 20%. It took seven months following the September 2018 peak before the S&P 500 again exceeded that previous high. The first half of 2019 was in truth, just making up for the losses of the final four months of 2018.

If you bought into the stock market (as measured by the S&P 500) at the bottom in December 2018, your investment is up 35%. If you bought at the 2018 peak and held on until now, your gain is only 12%. Timing matters for the stock market, and you want to buy on the declines and sell at the top when other investors are piling in.

The tricky part is that we only see peaks and bottoms in the historical rearview mirror. It’s hard to make money off the stock market table when share prices continue to march higher. Yet, history shows that at some point, we will get a 20% stock market correction. Market declines of more than 10% happen on average once a year. Here are some ideas to help you get ready to take advantage of the next big market decline.

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Disclaimer: The information contained in this article is neither an offer nor a recommendation to buy or sell any security, options on equities, or cryptocurrency. Investors Alley Corp. and its ...

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