The bear market that we find ourselves in will likely fade away and become a distant memory just as the bears of old, but in the interim dividends are very attractive. This could be the best time to invest in solid companies that have become accidental high-yielders.

Look, I get it…

If you have had cash on the sidelines during this bear market, you are feeling smart. You have avoided a fairly sizable correction and you ‘wisely’ haven’t taken a hit.

Congratulations…

Now, from an emotional standpoint, you are finding it very difficult to get back into stocks. The market is very volatile, and you are frightened of the wild swings that are happening almost daily.

I understand the feeling…

But history shows us that the best time to invest has been when it just doesn’t feel comfortable. I believe that true generational wealth will be created for those that are bold enough to take the plunge and get their cash back off the sidelines right now and start at least legging back into the market today.

This may very well be your time to be bold.

Cash on the Sidelines is Getting Eaten Alive by Inflation

One huge reason to take advantage of high dividends in this interim period is that one single ugly word…inflation. 

Right now, inflation is eating away at the spending power of that cash you have left sitting on the sidelines.

This is always true, but 1-2% inflation is a little bit easier to swallow than the 7-8% inflation rate we are currently seeing.

I am not telling you anything you don’t already know, but inflation is extremely high. It is the highest we have seen in 4 decades.

Let’s look at the numbers…If you have $250,000 sitting in the bank and inflation runs at 8% per year for the next three years, you will lose $55,328 in raw spending power. That’s right, the real value of that cash would only be worth $194,672.

I am not saying that I know inflation will remain at 8% for three straight years. I really don’t think it will. But even half that rate will still erode your value.

Inflation is very real, and it destroys your wealth.

Investing in High Yielding Companies Can Offset Inflation

Rather than sitting in cash, you could get paid to wait on a rebound in stocks by investing in companies that have tremendously strong balance sheets and now pay good dividends.

This is not a specific recommendation on any stock or sector.

Taking a look at a couple of tech juggernauts, you can see a couple of companies that now pay a good dividend. The recent market downturn has made companies accidentally high-yielders.

Even in the tech space, you can now find extremely attractive yields. The tech space hasn’t historically been a place where you find these types of yields. Utilities, however, have often been a place where you would run to find attractive dividends in the interim.

These companies could go down more as could the market as a whole. This is definitely possible as I have no idea what will happen in the market from day to day. Anyone who says differently is probably not being truthful. 

Getting paid to wait for a rebound in US equities could be a great way to fight the weight of inflation on your hoard of cash. 

Whether you prefer the conservative risk of utilities or the tech space, there is definitely investment income to be had from very well-capitalized companies right now.

When It Bounces Back, It Might Be Too Late

A big reason to average into the market right now is when it bounces back, it often bounces back very quickly. Taking a look at the best 10 days in the market over the past 15 years, all ten of them occurred either in the midst of a bear market or just as were exiting a bear market. And you don’t want to miss out on the best 10 days in the next 15 years.

The best time to invest has historically been when it doesn’t feel comfortable. Two of the very best days in the market occurred as we were exiting the financial crisis of 2008 when we saw two days in which the market rallied in excess of 6%. By waiting until it felt right, you would have missed out on enormous gains. And those high dividends that you would have earned in the interim would have plummeted on new equity purchases.

Take a look at these numbers…History is certainly no guarantee of future results.

But consider this…

The average 12-month return after the end of a bear market is 43.4%.

Wow!

Who wouldn’t want to get into the market when they know it has ended with those amazing numbers? The problem is that I can’t tell you when it will end.

I can tell you, however, when a bear market has started. It is easily defined as a drop in equity prices of 20% from the recent high. And US equities entered that territory on June 13, 2022.

Guess what happens, on average, 12 months after the market officially enters a bear market?

US equities, as a whole, average a whopping 23.9% return in the 12 months following their entry into bear market territory. That is an amazing return. In fact, it is more than twice as positive as the average return of the S&P 500 over the last 50 years which stands at 10.3%.

That does not mean it happens every time, but the averages tell a story. When quality companies are beaten up, they tend to recover fairly quickly. And keep in mind that right now, you can get paid to wait. In the interim, dividends are high.

Time in the market beats timing the market. Invest With Dupree Financial Group I know this might not ‘feel’ like the right time to invest. 

But you might not want to wait!

If you are invested heavily in cash, that money is being eroded by inflation.

It might make sense to invest in solid well-capitalized companies that pay good dividends... enough investment income to offset inflation.

More importantly, you should have a comprehensive customized financial game plan to meet your personal goals. And it is always a good time to get a no-obligation second set of eyes on your financial portfolio. 

At Dupree Financial Group, LLC we have the heart of a teacher, and a lifetime of experience investing in capital markets for clients. Our passion for hard-driven analysis and research gives us the confidence to help you grow your wealth and take advantage of all market conditions. Contact us today.

The post-Waiting For a Market Rebound? In the Interim, Dividends are High appeared first on Dupree Financial.

Disclaimer: Nothing in this article or on the podcast is a recommendation to buy or sell securities. Please consult an investment professional.