Introducing: A Low Volatility Investment for a Good Night’s Sleep
August has been a rough month for investors.
The Dow dropped more than 1,400 points in just the first week, and it’s continued whipsawing ever since.
That triggered fear in the hearts of many investors, and it may have been enough to make you swear off the market altogether.
But some sectors of the market are proving to be immune from this crazy activity, which is great news for anyone looking to grow and protect their wealth!
Let me introduce you to the Invesco S&P 500 Low Volatility Fund (SPLV). Take a close look at a chart of the fund’s performance this year below:
The fund is comprised of the stocks in the S&P 500 index that have the least amount of day-to-day movement.
In other words, these are the “boring” stocks that won’t likely give you a 15% overnight gain when they report earnings. But they also won’t crush you when something goes wrong at the company, or when investors start panicking and selling their shares at any price.
As you can see in the chart above, these stocks aren’t totally immune to selling.
Just like the rest of the market, SPLV began to move lower in the first few days of August when Trump announced a new wave of tariffs against China.
But unlike the rest of the market, SPLV didn’t lose as much on the way down. And then the fund bounced much more quickly when the market recovered.
The number one rule when it comes to your retirement investments is to protect your capital.
If you keep from losing too much when the market gets turbulent, you’ll always be in a much better place to take advantage of the inevitable rebound when things get better.
So it’s important to pay attention to which stocks actually hold up well during challenging times like we’ve had this month.
And the activity we’re seeing from SPLV is exactly the kind of performance that can help you sleep well at night, knowing that your retirement capital is safe.
But I think we can find an even better opportunity…
Picking Out the Best of the Best
It may surprise you to hear that I’m not recommending you buy shares of SPLV today.
While the fund does a great job of protecting its investors’ capital, there’s a way to do much better on your own by picking your own stocks.
This way you’ll avoid having to pay fees charged by Invesco to manage the fund. But you’ll need to learn how to pick out low volatility stocks to invest in.
The first tip I’d give you when picking low volatility stocks is to buy shares of companies that make money in good times and bad. For example, people buy consumer products like toothpaste, diapers, and soap regardless of what is going on in the economy. Even if you take a big cut in income, you’ll still figure out a way to buy these products.
Companies who sell these type products to the public will continue to generate reliable profits. And that’s exactly the type of investment that gives you steady returns year after year.
Second, you want to select stocks that pay a generous dividend. That way, you’re not counting on other investors driving the stock higher to make a profit. It’s nice when that happens of course.
But stocks that pay generous dividends allow you to collect cash along the way. And you can decide whether to use that cash for day-to-day expenses, or re-invest it in new shares of great stocks.
It helps that in today’s low interest rate environment, people are looking for alternative ways to get income from their savings. This is leading more people to buy dividend stocks and helping to send shares of these great investments higher.
My last recommendation is using a dividend reinvestment program — or DRIP.
This type of program uses your dividend payments to automatically buy new shares of the stock you’re invested in. Most large-cap dividend stocks offer this type of program at no additional cost.
And each time your dividend payment helps you buy more shares, your next dividend payment will be even larger!
This will ensure your wealth will accumulate over time. And all of that will happen with less back and forth trading. So you can grow wealth more effectively without losing sleep!
Here’s to growing and protecting your wealth!