The S&P 500 has produced phenomenal gains since bottoming in March of 2009, more than a decade ago.
Q2 hedge fund letters, conference, scoops etc
ValueWalk readers can click here to instantly access an exclusive $100 discount on Sure Dividend’s premium online course Invest Like The Best, which contains a case-study-based investigation of how 6 of the world’s best investors beat the market over time.
A decade is historically an unusually long time between recessions.
Now we don’t try to guess what the market will do in the future at Sure Dividend because that’s largely unknowable.
But one thing is certain, there will be another stock market crash at some point. It may not be this year, or next, but it will happen again eventually.
Here’s the critically important part…
Likely the single biggest mistake most investors make is selling when the market crashes. This means getting out of stocks at the worst possible time.
It’s tough to see your investment portfolio’s account value shrink. There’s no question about that.
But if you are are investing for income then bear markets become more bearable.
Think about it like this… Imagine you have a $1,000,000 investment portfolio in retirement, and that you have to sell $40,000 of it a year to create cash in retirement.
In good times, things go well… It’s just 4% of your portfolio value a year, after all. In most years, your portfolio probably generates more money than you withdraw. But what about during stock market crashes?
If the same portfolio were to fall by 50%, suddenly you have to sell 8% of your portfolio annually to generate your passive retirement income… That’s likely unsustainable. It also means selling at the worst possible time, when market values are irrationally depressed.
Many people in this situation get ‘fed up’, and go back to investing in less risky securities (with much lower expected returns), like bonds. This in effect ‘locks in’ losses from a market crash. And that’s how wealth is transferred from temperamental investors to patient investors who buy during recessions.
Put simply, I don’t want any Sure Dividend readers to see their wealth transferred to more patient investors during the next recession. Fortunately, there is a different way to invest that makes recessions an opportunity to be seized rather than a danger to be feared.
Here’s how – instead of thinking in terms of portfolio value, think in terms of portfolio income.
Instead of saying ‘my investment account is worth $1,000,000’, think ‘my investment account generates $40,000 in income annually for me’.
This puts the focus on what your investment account does for you rather than on its value separate of what you need it for (and that value is subject to market whims).
If you are a homeowner, your house is an excellent analogy. Homes are for shelter, safety, and a place of our own. If your home value declined by 30% that doesn’t mean you have to sell – why would you? It still provides everything you need it to. The only difference is now someone will pay you less for it… Buy who cares about that if you don’t need to sell?
Investment portfolios for investors in retirement or preparing for retirement are no different. We want income from them. This means investing in income producing securities.
At the end of the day, almost all of us are investing for security and income. What matters is consistent (and preferably rising) income payments from our portfolio, not the dollar amount of the portfolio.
Here’s a real world example. Aflac’s (AFL) share price declined over 70% (ouch!) from the beginning of 2008 to the depths of the Great Recession. But its dividend went from $0.12 per quarter to $0.14; the company increased its dividend while the market was panicking. Market prices went crazy, investment income was stable, and actually increased slightly.
In the above example, income investors would’ve seen their dividend income coming in and not much would’ve changed in life (except getting a small income raise – and no one complains about a raise).
Investors focused on price would’ve probably panicked and sold, locking in huge losses, depending on when one purchased Aflac.
Now here’s where things get really exciting… When you focus on income instead of prices, you can profit from market crashes.
Take a look at Aflac again. Aflac stock yields 2.0% today. It yielded under 2% before The Great Recession. When its price was in free fall, and people were panicking, Aflac’s yield briefly went above 7%.
Said one more time, Aflac’s yield went from under 2% to over 7%. This is the same company, just at different times. When you buy makes a big difference.
You can use market crashes to your advantage by thinking of them as deep discount sales on great businesses.
You can take advantage of ‘fire sale’ prices during market crashes by:
- Selling overvalued securities and then reinvesting the proceeds into the most undervalued suecrities
- Or simply investing some of your excess dividend income during recessions
Keep in mind, for every seller there is a buyer in the stock market (assuming a trade gets processed).
When people are panic selling, savvy investors are quietly on the other side of those transactions snapping up great businesses at absolutely unfair prices.
It isn’t fair for the sellers (it is their choice though), but it’s very profitable for buyers.
Once you have the income investor mindset in place, the next question becomes:
How to I find recession safe income stocks to buy now?
And that’s where the Sure Retirement Newsletter becomes very useful.
The Sure Retirement Newsletter provides actionable buy and sell decisions and new Top 10 lists of 4%+ yielding securities each month so you stay up to date with high income investing in quality securities.
Here’s how…
The Sure Retirement Newsletter is powered by The Sure Analysis Research Database, which includes more than 600 individual company reports, almost all of which are updated quarterly. And we will be adding more income securities based in part on member recommendations year after year.
There are high quality income security bargains to be found in the market, but it requires analyzing hundreds of candidates to find the few that really stand out.
“The person that turns over the most rocks wins the game. And that’s always been my investing philosophy.”
– Peter Lynch
Having a subscription to The Sure Retirement Newsletter means you have a team of investment researchers ‘turning over’ hundreds of income securities for you, constantly looking for the best income stocks, and sending you the 10 best 4%+ yielding investments we find each month.
The Sure Retirement Newsletter costs $89/year. It is priced to be an absolute no-brainer bargain relative to the value provided.
But we wanted to provide you with an even better value proposition…
That’s why from now through 7/29/19 (this coming Monday), you can join the Sure Retirement Newsletter for just $49/year.
And, your price will never increase after locking in this discounted price.
Also, we have a risk-free 7 day trial. You are literally not billed for 7 days. Opt out during that time frame by emailing support@suredividend.com, and you won’t pay a penny (but most people stay on past their free trials because our newsletters deliver serious value).
Note: This offer expires the morning after 7/29/19. Enter coupon code Save40 if it doesn’t apply automatically.
The same offer is also available on our Sure Dividend Newsletter. While Sure Retirement focuses exclusively on 4%+ yielding REITs, stocks, and MLPs, The Sure Dividend Newsletter focuses on dividend growth stocks.
These are stocks that have, on average, lower yields than Sure Retirement recommendations, but have (again, on average) better growth prospects.
Note: This offer expires the morning after 7/29/19. Enter coupon code Save40 if it doesn’t apply automatically.
Email suppport@suredividend.com if you have any questions. We look forward to hearing from you!
Thanks,
Ben Reynolds
Q2 hedge fund letters, conference, scoops etc
ValueWalk readers can click here to instantly access an exclusive $100 discount on Sure Dividend’s premium online course Invest Like The Best, which contains a case-study-based investigation of how 6 of the world’s best investors beat the market over time.
