The pursuit for downside protection in equity markets … the hunt for any meaningful income in a low-yield world … the search for a pocket of the market that may provide that rare combination of growth and defensiveness. Our three most-read blogs of 2020 sound like a list of some of the biggest needs for investors in 2021. Given their relevance, we wanted to package them together to offer perspective heading into the new year. You can read our three most popular blogs below:
Winning Ugly: Bear Market Compels Investors to Assess Downside Protection
U.S. equities’ precipitous slide into bear market territory can make anyone wince when they peek at their investment returns. But long-term investors would be wise to open their eyes wide and take a sobering assessment of their portfolio’s downside capture during these periods.
When heavy losses occur the ability to avoid falling as much as the broader market can have a large effect on a portfolio’s long-term return. Think of it as “winning ugly.” By falling – but not falling as far – a portfolio can get back to pre-crisis levels quicker and start compounding returns again.
The value of winning ugly has probably been easy for many investors to forget. After all, the recent market rout just ended the longest equity bull market run in U.S. history. However, if investors want to be prepared for what markets might bring next, we suggest a simple strategy: think about the bare essentials.
Dividend Cuts Pose New Challenge to Advisers Seeking Income
Advisers serving clients who rely on investment income have a tough task ahead. Even before the pandemic, a historically low rate environment made it difficult to find stable income. A rash of companies canceling or suspending dividends has intensified the challenge.
We believe advisers and investors can still find stable dividend payers. But the environment has winnowed the field to the most recession-resistant industries
How Bad is the Dividend Picture?
Through late April of this year, 83 U.S. companies and REITs (Real Estate Investment Trusts) had suspended or canceled dividends, the Wall Street Journal reported.
New Look for Utilities Sector: Defensive with Exciting Growth
Perhaps unsurprisingly, investors are taking a close look at utilities stocks again, or should be, due to their defensive characteristics. But those focused on the sector’s defensiveness may be missing an equally compelling reason to invest: exciting growth.
Utility stocks often perform well relative to the rest of the market during downturns, and for good reason: The essential services utilities companies provide translate into stable earnings and a stable dividend. That stability is a port in the storm when other companies struggle through a recession. The relatively high dividends paid by utilities are also attractive in an environment where interest rates are low and yield is hard to find.
Disclosures:
Reaves Asset Management is an investment adviser registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940. Registration does not imply any skill or training. Reaves is a privately held, independently owned “S” corporation organized under the laws of the State of Delaware.
The information provided in this blog does not constitute, and should not be construed as, investment advice or recommendations with respect to the securities and sectors listed. Investors should consider the investment objective, risks, charges and expenses of all investments carefully before investing. Any projections, outlooks or estimates contained herein are forward looking statements based upon specific assumptions and should not be construed as indicative of any actual events that have occurred or may occur.
Past performance is no guarantee of future results.
All investments involve risk, including loss of principal.
All data is presented in U.S. dollars.
Important Tax Information: Reaves Asset Management and its employees are not in the business of providing tax or legal advice to taxpayers. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax adviser.
