These stocks are your friends during a market crash | personal financing

(Morri Bachmann)

It’s been a really tough ride for investors over the past few weeks. Stock values ​​have been dropping since the second part of April, and that’s on top of the losses investors already saw in their portfolios due to volatility earlier in the year.

At this point, it would be premature to say that we are in the midst of a stock market crash. But it is certainly fair to say that we indulged in a file bear market. And that can be disconcerting, whether you’re a new investor or have held a portfolio of stocks for years.

If you’re worried about the entire market crashing, there’s one type of stock you can pay to load – or hold on to.

Image source: Getty Images.

Take advantage of dividend stocks

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It is estimated that more than 400 companies within Standard & Poor’s 500 Dividend stock index for investors. If you want to hedge your bets during periods of volatility, dividends are a good way to go.

Companies that pay a dividend tend to do so on a quarterly basis. This means that even during periods of general stock market slowdown, you can look forward to those expected payouts.

Here’s another way to put it: Dividend-paying companies tend to do so even during periods when their stock price is declining. This gives you options as an investor. You can take the payments of your winnings and use them as cash if you need the money. This, in turn, can make it possible to leave your portfolio alone and avoid liquidating investments at a loss when they go down.

If you don’t really need the cash, it’s a good idea to reinvest your earnings. This can help boost your portfolio’s total return or reduce the damage that occurs when market conditions are unfavorable.

How to choose the right stocks

If your goal is to secure a steady stream of dividend income, consistency is key. As such, you’ll want to take a look at the companies that have paid steadily (or better yet, moreearnings over the years.

One thing you don’t necessarily want to do is chase the highest profits out there. Higher profits do not necessarily mean that a particular company is doing better financially than its competitors or that it has greater growth potential. In fact, it’s easy to argue that high-earning companies may limit their growth by not sufficiently reinvesting in their own businesses.

However, for the most part, companies with a solid history of paying dividends are established companies with strong financial backing. And if you’re looking for a way to weather a stock market crash – whether in the short or long term – it pays to consider loading your portfolio with dividend-paying stocks.

There is another option worth looking into if you are focusing on dividends real estate investment fundsor real estate investment trusts. REITs are required to pay 90% of their taxable income as dividends to shareholders. If your portfolio is currently free from real estate stocks, you will get the added benefit of diversification. This can also be useful in weathering a stock market crash.

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