I commented to a fellow blogger that no one has the answers investors are asking these days, and I don’t have them either. All I have are some thoughts that I’d like to share.
Investors are seeing their portfolios drop almost daily and no one knows where the bottom is. For retirees this is especially worrisome as it becomes critical how much they can safely withdraw. Hopefully you have the asset allocation and plan in place to get through this. We are experiencing one of those recessions that every investor gets warned about will come. And every time the fear and anxiety eventually pass, and the markets come back.
“This Time Is Different” is the title of a book by Carmen M. Reinhart & Kenneth S. Rogoff. They argue that, “no matter how different the latest financial frenzy or crisis always appear, there are usually remarkable similarities with past experiences from other countries and from history…. If there is one common theme to the vast range of crises we consider in this book, it is that excessive debt accumulation, whether it be by governments, banks, corporations, or consumers, often poses greater systemic risks than it seems during a boom”.
But this time it may be different. This is a pandemic like we’ve never seen before in our lifetime. We have no idea how long and how severe this will still get. This economic crisis is created by the shutdown of our businesses. When a vaccine or another solution is found to bring this virus under control, we should see things come back. But how long will it take?
For dividend investors like me we believe in owning solid large cap companies that have a very long history of paying dividends. The Canadian banks have continuous dividends for over 150 years. Utilities that provide electricity and gas for our houses should also be counted on to continue their dividends. The CEO of Bell (BCE) said yesterday they have no plans to change the dividend policy.
I believe we will see some dividend cuts in our portfolios but hope that many companies will continue to pay.
Don’t panic and stay the course. Be safe.