Financial markets across the globe have recovered most of their lost ground. However, the recovery in the stock market isn’t backed by improving fundamentals. With tonnes of uncertainty, a high unemployment rate, weak economic data, and rising coronavirus infections, it isn’t hard to gauge that a stock market crash could be near.
Even if the stock market doesn’t crash again, high volatility could lead to knee-jerk reactions, which can be avoided. Here’s how I would invest my $6,000 before the stock market crashes again.
Buy a strong dividend-paying utility stock
The utility companies are known for their ability to retain value and consistently pay higher dividends. I would bet on Algonquin Power & Utilities (TSX:AQN)(NYSE:AQN) to protect the downside risk and earn steady dividend income.
The company has consistently performed well and has doubled in the last five years. The S&P/TSX 60 Index has increased by 16% during the same period.
Algonquin Power & Utilities owns diversified utility assets that help the company to generate predictable and growing cash flows irrespective of economic situations. Moreover, it also owns renewable assets that are supported through long-term power purchase agreements.
Its dividends are very safe and could continue to grow in the future. The company’s rate-regulated utility assets and resilient renewables business should support the company’s cash flows and, in turn, its payouts. The company has raised its dividends for 10 years in a row and offers an attractive forward yield of 4.8%.
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Invest in Canada’s top company
Investors should note that economic downturns or rising coronavirus cases are unlikely to hurt its stock, as a surge in e-commerce activities in North America acts as a long-term tailwind. Besides, the recent pullback in its shares presents a good entry point.
Its revenues are growing faster than its expenses, which is encouraging. Besides, the addition of high-margin products and services bodes well for growth.
Through partnerships with the world’s leading companies like Facebook and Walmart, Shopify is adding newer sales channels. The addition of new sales channels should help in driving its merchant base and accelerate the demand for its platform and other digital products.
Shopify’s market share has steadily grown in the past several years and could continue to expand in the future, driving its stock higher.
Rely on this top defensive stock
A stock market crash or economic downturn is unlikely to have much of an impact on the shares of Metro (TSX:MRU). The food and pharmacy retailer should continue to witness steady demand and is likely to generate consistent growth.
In the most recent quarter, Metro’s revenues rose nearly 8%, reflecting sustained momentum in the food and pharmacy same-store sales. Meanwhile, its earnings marked double-digit growth, which is impressive. Though Metro stock is not risk-free, its low beta indicates that wild market swings shouldn’t impact it much.
Metro is a Dividend Aristocrat and has raised its dividends for 26 years straight. Sustained demand for its products, expansion of its e-commerce platform, and a decent dividend yield of 1.5% make it a must-have stock in your portfolio for safety and growth.
So, if you’re worried about another market crash, investing in these three TSX stocks is probably the best option. Buying a mix of growth, income, and defensive stocks should help in diversifying risk and boost returns.
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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.
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Fool contributor Sneha Nahata has no position in any of the stocks mentioned. David Gardner owns shares of Facebook. Tom Gardner owns shares of Facebook and Shopify. The Motley Fool owns shares of and recommends Facebook, Shopify, and Shopify.