Tags: defensive | stocks | investors | dividend

US News: 'Defensive' Stocks Aren't So Safe Any More

US News: 'Defensive' Stocks Aren't So Safe Any More
(Dollar Photo Club)

By    |   Thursday, 03 December 2015 07:00 AM

Given the state of the world with global terrorism and stock market uncertainty, it's easy to see why investors would want to get defensive. However, that may be the worst way to ride out the storm.

"Nervous investors should think twice before diving into so-called defensive stocks, especially those securities with high dividends," US News’ Simon Constable warns.

"You might end up putting more risk into your portfolio than you realize."

"Stocks that have less volatility than the overall market and pay higher dividends than most other stocks are often seen as a way to reduce risk in a portfolio. Traditionally, these are found in the defensive sectors, including consumer staples, utilities and health care," he said.

"Sectors are trading at high multiples," he explains.

The problem is that "the defensives are expensive," says Ramona Persaud, portfolio manager for Fidelity Global Equity Income fund (FGILX), the Fidelity Dividend Growth fund (FDGFX) and the Fidelity Equity Income fund (FEQIX).

"She warns that investors could easily lose more money from a declining stock price than they gain from a healthy dividend."

To be sure, Newsmax Finance Insider Charles Sizemore urges caution when investing in divdend stocks.

He offers a handful of tips, two among them:

  • "The characteristics that make a good dividend stock are remarkably unsexy. You want reliability and longevity. The longer a stock has paid its dividend without cutting it, the better."
  • "Avoid acting impulsively. Nearly every mistake I’ve ever made came from acting emotionally without thinking through the details rationally."

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Given the state of the world with global terrorism and stock market uncertainty, it's easy to see why investors would want to get defensive. However, that may be the worst way to ride out the storm.
defensive, stocks, investors, dividend
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2015-00-03
Thursday, 03 December 2015 07:00 AM
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