I have spent far too much time trying to figure out how to protect my family’s wealth from a market correction. I have obviously not spent much time learning how to be a good writer.
I’ve listened to countless hours of pundits discussing asset allocation (I consider myself cool so this really hurts my self-image). I’ve also studied portfolio theory and have read over seven-thousand pages of stock market investing books (I may very well not be cool at all…oh well I am who I am).
One fund that is, and will always be, a staple of my portfolio is XLP. This is a low-cost ETF that owns consumer staples stocks.
This fund owns companies that sell goods and services that most human beings want and need. It’s a boring fund with boring companies…see below
You now see what I mean..boring….
However, most of the companies that a this fund owns increase their dividend payments yearly. This means that XLP represents a rising income stream that should last for a lifetime. This fund also has a higher yield than the SPY. In other words, it pays more income in the form of dividend payments to investors.
You can see that the current yield is 2.49% while the SPY’s is 1.3% at the time of this writing.
Notice how this fund doesn’t pullback as much in market corrections.
In the 2002 crash XLP went down approximately 20%
In the 2008 crash XLP went down approximately 15%
Let’s contrast this to the SPY (my gauge of the overall market).
In the 2002 crash SPY went down approximately 22%
In the 2008 crash SPY went down approximately 37%
There is a lot of risk in the world today. Governments around the world have insane debt levels that are unimaginable. The pandemic is far from over. Most politicians continue to speak in platitudes and won’t speak the truth. Don’t get me started on foreign policy.
My good friend always tells me that if I am scared to ‘get a dog’. Well I have one but I also own a lot of XLP.
I know that even in a recession, the companies in XLP will still be doing well.
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In order to be a successful stock market investor it’s important to avoid common investor mistakes. Learn what not to do here…