The strategy you should use in bull or bear markets is always the same, but it will be the reverse of what you might think. In a bull market, you should re-balance your portfolio to sell or take-profits on your big winners and hunt for some value plays. For example, if there is a bull market in finance and consumer stocks, utilities and some resource stocks might suffer. If there is a bull market in resources and commodities, finance might suffer. Pay attention to how each sector plays off of the others, and pay attention to how bonds react to equities.
Signs are Conflicting
There's some confusing and conflicting data out there about where the stock market is headed. On one hand, the markets look oversold (in a big way), plus all of the market pundits are screaming 'take your money and run!'On the other hand, Dow theory has signalled that this market is currently a 'buy'. The theory has been wrong before, giving false buy signals. Depending on how you allocated your resources, this may not be one of those false signals.
Despite the fact that the market is overbought, dividend stocks represent an excellent way to both return your money through dividends, and protect your principal from market shocks should they occur. This is especially the case for companies that have raised their dividends for more than 20 years in a row, as it means they have been able to do so through all kinds of good and bad markets.
"Safe" Emerging Market Plays
An article posted by our partners at money morning gave several dividend-paying US domiciled stocks that have, according to Keith Fitzgerald, potential to succeed well in emerging markets. Let's look at each one according to its asset class to see where these companies could fit into a portfolio.Colgate Polmolive - NYSE: CL - Consumer Non-cyclical
Exxon Mobile - NYSE:XOM - Energy - Integrated Oil and Gas
McDonald's - NYSE:MCD - Consumer services - Restaurants
3M - NYSE:MMM - Capital Goods (construction, healthcare, transportation)
Pfiezer - NYSE:PFE - Healthcare
Essentially, in these companies you have concentration in just 3 out of the 5 economic sectors. The five main economic sectors we are interested in are as follows (but it can be as simple or as complicated as you wish).
- Finance
- Utilities
- Manufacturing
- Consumer
- Resources
Colgate and McDonald's are consumer-based, Exxon is firmly a part of the resource sector, while 3M and Pfizer are, broadly speaking, manufacturing-related. Since they are all massive, each of these companies has their hands in several parts of their respective industries, plus they are globally diversified in terms of where they operate their businesses. These are all good things to consider when purchasing equities in today's scary investing climate. These companies may not give you double your money back, but they will surely help you build wealth over the long-haul.
Other Sectors Are Important, Too
So, the only two sectors not covered here are the Utilities Sector and the Finance sector. For the utilities sectors, consider telecoms such as Telus. For finance, TD bank could be a solid choice as it trades on the US exchange, has been steadily profitable through its acquisitions of US businesses in the sector and benefits from being domiciled in Canada, which has more stringent rules for it's banking sector than the US. This helped TD to fair well through the 2008/2009 meltdown.Beyond these major corporations, you can diversify into small cap companies, as well as contrarian plays like Gold and Precious Metals mining, which are currently being decimated by shareholders.
All of This is only if you are interested in buying individual stocks. Our preferred method of exposure to stocks is through stock funds that weight different part of the economy, but right now especially funds that are focused on dividend paying companies. More on this later ...
Happy investing
R
