The U.S. stock market has been holding up better than the Canadian market because the latter has a bigger reliance on energy and mining sectors.

After the market tanked in 2008, the U.S. stock market has essentially gone up for seven years, while the Canadian market has retreated for most of 2015 and recovered slightly since the start of the year due to a commodity price recovery.

If you’re worried about the market tanking, which we know will happen at one point, there are some things you can do.

Hold quality dividend stocks

You can allocate a portion of your portfolio to quality dividend stocks that are priced at a value.

Many quality dividend stocks yield more than fixed-income assets. You can collect cash dividends and put them in your high-interest savings account or a short-term GIC.

Why choose short term? You can buy more quality stocks when the market tanks.

Some quality dividend stocks that are inexpensive today include Brookfield Property Partners LP (TSX:BPY.UN)(NYSE:BPY), Brookfield Infrastructure Partners L.P. (TSX:BIP.UN)(NYSE:BIP), and Bank of Nova Scotia (TSX:BNS)(NYSE:BNS). They yield 4.6%, 5.1%, and 4.4%, respectively.

They are from different industries, so investors can consider them as a mini, diversified portfolio. An equal-weight portfolio in these three stocks generates an average yield of 4.7%.

If you buy $5,000 in each of these companies today, you’ll generate $705 of annual income. That income is likely to rise because all of them tend to increase their dividends every year.

If the market tanks, holding quality dividend stocks is a defensive strategy that helps generate healthy cash flows that you can use to buy more shares at a discount.

Build a cash position

You can be more proactive in building a cash position by deliberately holding off on investing and saving your paycheques.

Let’s say you earn a Canadian median income of roughly $35,000 and you’re able to save 15% of your paycheque each month. You’ll be able to save a little over $400 every month, or $5,250 a year.

Sock away those savings in a high-interest savings account or a GIC until you see substantial value in the stock market to invest in.

Visualize your stock portfolio cut in half

Lastly, try to visualize your stock portfolio cut in half. This is an essential exercise, and doing so will prepare you mentally in case it actually happens. In the last recession, many stocks fell 20-50% from the pre-financial crisis level to the low point in 2009.


If you’re afraid the market will tank, consider holding a part of your portfolio in quality dividend stocks that generate above-average income.

You can also build a larger than normal cash position by securing your paycheque savings in high-interest savings accounts or GICs.

Lastly, visualize your portfolio being cut in half. By going through this exercise, you should be able to better cope with the real thing if it happens.

Stock buy alert hits astounding 96% success rate!

The hand-picked investing team inside Stock Advisor Canada, recently issued a buy alert for one special type of "bread-and-butter" stock where The Motley Fool U.S. has banked profits on 23 out of 24 recommendations. Frankly, with an astounding 96% success rate that has delivered average returns of 260%, chances are this new pick could deliver life-changing returns as well. Because the team at Stock Advisor Canada fully embraces the same time-tested investing philosophies that have led to countless Motley Fool winners globally. So simply  click here to unlock the full details behind this new recommendation and join Stock Advisor Canada.

*96% accuracy includes restaurant stock recommendations from Motley Fool U.S. services Stock Advisor, Rule Breakers, Hidden Gems, Income Investor and Inside Value since each services inception. Returns as of 5/27/16.


Let’s not beat around the bush – energy companies performed miserably in 2015. Yet, even though the carnage was widespread, not all energy-related businesses were equally affected.

We've identified an energy company we think offers one of the best growth opportunities around. While this company is largely tied to the production of natural gas, it doesn't actually produce the gas. Instead, it provides the equipment required to get natural gas from the ground to the end user. With diversified operations around the globe, we think it's a rare find in the industry.

We like it so much, we’ve named it as 1 Top Stock for 2016 and Beyond. To find out why, simply enter your email address below to claim your FREE copy of this brand new report, "1 Top Stock for 2016 and Beyond"!

Fool contributor Kay Ng owns shares of Brookfield Infrastructure Partners, Brookfield Property Partners L.P., and Bank of Nova Scotia (USA). Brookfield Infrastructure Partners L.P. is a recommendation of Stock Advisor Canada.