Investing in Retirement in a Volatile Stock Market


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A few simple investment tips can be applied to Canadians who are retired or planning for retirement in a volatile stock market. These tips can help you focus on what matters.

Focus on the long term

No short-term capital should be invested in stocks, as stocks are volatile by nature. Even when a company’s fundamentals remain strong or defensive, a poor macroeconomic environment can still cause quality stocks to sell off.

This is why, when investing in stocks for retirement, investors should have an investment horizon of at least three to five years – the longer the better. The money you need to spend during the year absolutely must remain in the form of cash and cash equivalents.

The Motley Fool noted that “of the 10 bear markets since 1950, the longest was 929 days and the shortest 33 days”. 929 days is just over 2.5 years. So for very cautious Canadians, it’s probably safer to have the money you need to live on for about 2.5 years in something like a savings account. This cash will help you ride out market volatility, especially the market correction we are currently experiencing.

Experienced investors know that market corrections are opportunities to buy selling stocks. Some stocks can even help you generate passive income.

Generate passive income

Dividend investing is as passive as passive income investing can be. Explore dividend stocks that have a proven track record of paying safe dividends. Ideally, they would sustainably increase their dividends. You can start your search with Canadian Dividend Aristocrats who tend to increase their dividends over time.

Stocks of major Canadian banks, utilities and telecommunications are common core holdings for passive income. They understand Royal Bank of Canada, Fortis, Enbridgeand ECB. High inflation and rising interest rates to fight inflation have led to an increased risk of recession, which is weighing on equities. Right now, these dividend-paying stocks are all fairly priced, with the exception of Royal Bank, which offers a bit better value.

At writing, they offer safe returns of 4.1%, 3.4%, 6.3%, and 5.8%, respectively. If Canadians can buy these stocks on sale during this market correction, they can potentially hold onto them until retirement for growing passive income.

Own quality companies

To invest in retirement, you probably don’t want to risk your money in speculative stocks that could you win the jackpot. This is because these stocks can also cause you to lose your shirt. Instead, you need to carefully screen for quality companies that offer stable growth and sustainable dividend income. To emphasize, if you can buy these dividend-paying stocks at great discounts, you can probably hold onto them until retirement for passive income.

In addition to the stocks already mentioned, you can also check out companies such as Brookfield Asset Management, Canadian National Railwayand easy which have generated growing dividends while delivering above-average growth.

If you want higher income now, consider getting into real estate investing through real estate investment trusts. To name a few, Dream Industrial REIT, Allied Properties REITand SmartCentres REITs yield of 5.8%, 6.7% and 6.7%, respectively, to the drafting.


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