No Savings at 50? I’d Buy Cheap Dividend Stocks After the Market Crash

Purchasing dividend stocks right now could boost your retirement prospects.

Various Canadian dollars in gray pants pocket

Image source: Getty Images

The stock market’s recent crash highlights the risks involved in buying equities. In the short run, further volatility may be ahead, and investors could experience continued declines in portfolio valuations.

However, over the long run the prospects for recovery seem to be relatively bright. The stock market has always produced a successful turnaround when faced with bear markets. And, at age 50, you are likely to have sufficient time available before retirement to experience the stock market’s recovery.

As such, now could be the right time to buy a selection of stocks to boost your chances of retiring comfortably.

Time horizon

Buying stocks today on a one-year view may lead to significant losses for an investor. Depending on how the spread of coronavirus continues, the stock market may experience further declines in the short run.

However, at age 50 you are likely to have at least ten or fifteen years until you will retire. Over such a timeframe, the stock market is likely to have adequate time to fully recover from its present challenges.

Therefore, buying stocks today and holding them for the long run could be a sound move. It may enable you to capitalise on low valuations for high-quality businesses that leads to above-average capital returns for your portfolio.

Recovery prospects

At the present time, a stock market recovery may not seem all that likely. Investor sentiment is weak, and coronavirus looks set to have a substantial impact on economic growth.

However, past bear markets have often displayed similar traits. For example, during the financial crisis it was difficult, at times, to see how the severe challenges facing the banking sector would be fixed. Likewise, other bear markets have left investors struggling to see how a recovery is possible.

The stock market, though, has always delivered a successful turnaround from its past crises. A mixture of policy change, such as quantitative easing, and the resilience of the world economy is highly likely to produce a similar recovery in the coming years. Therefore, if you have a long-term time horizon, the current low valuations on offer could be an opportunity to build a portfolio ahead of a potential recovery.

Diversity

Buying cheap dividend stocks today could lead to high returns in the long run which boost your retirement prospects. It is, of course, highly important that you buy a range of companies that, together, offer a high degree of diversity.

It is currently unknown which industries will suffer the most from the impact of coronavirus. It makes sense for investors to buy companies operating in different geographies and industries to reduce their reliance on a specific sector or location. This will help to lower your risks, and may even enable you to capitalise to a greater degree on the prospects for the stock market to improve your financial outlook in older age.

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.

More on Dividend Stocks

young woman celebrating a victory while working with mobile phone in the office
Dividend Stocks

3 CRA Benefits Most Canadians Can Grab in 2024

You can save on taxes by claiming the dividend tax credit on Fortis Inc (TSX:FTS) shares.

Read more »

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

edit Woman in skates works on laptop
Dividend Stocks

3 No-Brainer Stocks to Buy Under $30

These three stocks all offer a huge deal for investors looking for dividends, as well as growth that will last.

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

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

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »