The major stock markets have lost about 30% and gave away all the profits earned in the last 2 1/2 years. If you invested in September 2017 and sold today, you have exactly the same amount.
Unless you own dividend-paying stocks. Since September 1, 2017, the S&P Dividend Aristocrats Index beat the S&P 500 by more than 5%. “Dividend Aristocrats” are S&P 500 stocks that have raised their dividends for at least 25 years in a row. 5% over 2 1/2 years does not sound much, but it is better than 0% and you get more dividend income every year.
There are plenty of quality companies that are now paying dividend yields we could only dream of a few weeks ago.
Don’t invest all your available cash in the market now. Nobody knows if we’re at or near the bottom. But it’s a good idea to start with a small position and adding to them slowly when markets fall further. Start buying solid stocks with rising dividend yields. If we’re not at the bottom, you’re getting paid to wait and you’ll get paid more next year when the dividend increases. The further the stock price falls, the higher the dividend yield will be, as long as the dividend does not get cut.
Take things slow. Economies and stock markets have experienced all kinds of disruptions and near financial collapses, but always recovered and went to new highs over the long term. Remember, the economy and financial markets rebound within a relatively short period of time. Even the most recent bear market during the Great Recession in 2008, only lasted 1 1/2 years.
The short-term future is uncertain. But long term, we know that markets should go up. They always have and will continue to do so. It is not a matter of if, but of when.
Sven Franssen