3 Brilliant Moves to Make if the Market Tanks Again

Dividend stocks like Fortis Inc (TSX:FTS)(NYSE:FTS) can provide safety in down markets. But there are many other smart moves you can make during downturns.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

For some investors, corrections can be harrowing experiences — doubly so if there hasn’t been a major one in a long time. Although the recent correction has not (so far) been massive, it began at an ominous time: the average bull market lasts eight to nine years, while the average bear market lasts just 1.4. The recent downturn came after 9.5 years of mostly steady gains, which raises the question of whether we’re in for a protracted bear market. We’re not quite there yet. But with signs like rising interest rates, a housing slowdown, and high debt on the horizon, there are reasons to worry.

But you needn’t fret too much. With the right investment strategy, you can make it through a prolonged bear market without a scratch. In this article, I’ll be sharing three solid moves you can make in the event of another market collapse, starting with one that makes sense both in good times and bad.

Buy dividend stocks (and reinvest)

Corrections are good times to buy any type of stock. But for jittery investors who can’t handle seeing prices go down, dividend stocks provide peace of mind in the form of income. Some stocks offer income that beats bank interest and even most bonds. Many bank stocks, for example, have yields in excess of 4%. Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is just shy of that mark at 3.95%, but with a 9.3% annual growth rate, the income on TD shares bought today could double in a little over 10 years. You can also increase the pace at which your income rises by reinvesting your dividends.

Invest in utilities

From October 18 to December 31 of last year, Fortis (TSX:FTS)(NYSE:FTS) shares rose from $42 to $45.51 — an 8.3% gain. The TSX, by contrast, fell 7.7% in the same period. Was it good luck or incredible fundamentals? Hardly. The most likely explanation for Fortis’s rise during the correction was the simple fact that it’s a well-regarded utility stock.

Investors flock to utilities in times of economic uncertainty, because they have dependable income streams that won’t be hit too much by economic malaise. This dependability is the reason that Fortis has been able to raise its dividend every year for 44 consecutive years. It should be noted that Fortis itself suffered some earnings misses in 2018 owing to U.S. tax changes and losses on Aitken Creek derivatives. However, its cash flow is strong enough to continue raising its dividend for the foreseeable future.

Pay off debt

Last but not least, if you find yourself in a down market that shows no sign of picking up steam, one great move would be to pay off debt. A liability is the opposite of an asset, so paying down debts can be thought of as a kind of inverted investment. Certain types of debt have interest rates that exceed stock market returns in even the best years. In Canada, for example, the average annual interest rate on a credit card is between 19% and 20.99%. If you don’t see any stocks you like, paying off those types of debts can be a great alternative. And regardless of what’s happening in the markets, it’s always good to keep your “personal balance sheet” in the black.

Should you invest $1,000 in Fortis right now?

Before you buy stock in Fortis, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Fortis wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Button has no position in any of the stocks mentioned.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

How I’d Allocate My TFSA Contribution to Canadian Value Stocks This Year

I’d split my $7,000 TFSA contribution across solid dividend-paying stocks from different sectors

Read more »

dividend growth for passive income
Dividend Stocks

Why I’d Invest in Canadian Value Stocks for Both Stability and Growth

Three Canadian value stocks are buying opportunities for investors looking for stability and growth.

Read more »

investment research
Dividend Stocks

Got $15,000? 3 Blue-Chip Stocks Every Canadian Should Consider

Here's why investing in blue-chip TSX stocks such as CNQ and CNR should derive outsized gains in 2025 and beyond.

Read more »

protect, safe, trust
Dividend Stocks

Where I’d Allocate $20,000 in 2 Safer High-Yield Dividend Stocks for Retirement Needs

Here are two safer, high-yield dividend stocks I'm looking at for my retirement needs.

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

3 Reasons I’m Considering Enbridge Stock for a $5,000 Investment This April

I'm considering Enbridge stock to provide some defensive appeal and a juicy dividend to my long-term portfolio.

Read more »

monthly desk calendar
Dividend Stocks

A 9.2% Dividend Stock Paying Cash Every Single Month

With one of the highest dividends out there, this dividend stock deserves attention in your portfolio.

Read more »

Happy golf player walks the course
Dividend Stocks

Build a Powerful Passive Income Portfolio With Just $20,000

If you are worried that the bear market could reduce your savings, these stocks can build a powerful passive income…

Read more »

Hand Protecting Senior Couple
Dividend Stocks

How I’d Use My $7,000 TFSA Contribution to Start Retirement Planning

These TSX stocks have solid fundamentals and are well-positioned to deliver significant tax-free total returns over time.

Read more »