Not another article about the market going to crash? Don’t worry; I’m not going to tell you what you already know. I’m not the kind of guy who is passive and cry while waiting. There is an absolute truth that comes with each bull market: it will hit a wall. Market corrections happen all the time. They are especially brutal when it’s been a while. It’s like that time at the party where you thought you could handle a whole bottle of Jack Daniels because you were drinking slowly through the night. The longer the party lasts, the harder it is when you wake up.
As drinking water, taking Tylenols and, most importantly, stopping before it’s sunset will help you recover from your latest party, there is a step-by-step guide you can follow as an investor that will make sure you wake-up without a massive headache once the music is off and the market crashes.
Step #1: Make sure you hold “bonds” in your portfolio
Since I started investing in 2003, I’m a 100% equity guy. This has never changed and most likely probably won’t in the future. Instead of buying fixed income products, I always make sure my portfolio has its shares of “bond type of holdings”. You know, those rock solid companies that have been paying and growing the dividend before fire was discovered? Here are a few examples to help you identify those:
3M Co (MMM). With 50% of its revenues coming from repetitive sales, MMM is the definition of a dividend growth company. It’s business model is built on innovation (where it spends more than any of its competitors) and product quality. This company is always one step ahead of the competition and its clients know it.
Procter & Gamble (PG). PG has 65 brands in which 21 generate between $1 and $10 billion in sales and 11 between $500 million and $1 billion in sales. The company is more diversified geographically than any balanced mutual funds. Owning PG shares is like owning 65 cash flow making machines.
