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Stock Market Crash: Time to Buy Utility Stocks

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It might be time to buy utility stocks for your retirement portfolio. No one wants the stock market to fall again. Nevertheless, many analysts are concerned about the current trajectory of the global economy.

Federal reserve banks around the world are propping up the stock market through easy monetary policy. Will it be enough to sustain the market valuations of stocks until the world returns to pre-COVID-19 levels of economic activity?

The price of gold is above 10-year highs at US$1,954 at the time of writing. Warren Buffett famously dipped into gold stocks with a US$564 million investment in August.

With investors cautious about the direction of the market, is it time to boost your holdings of safety stocks like gold and utilities? If you want to remain fearless, yet safe with your hard-earned savings, maybe it is time to consider buying stock in Algonquin Power & Utilities (TSX:AQN)(NYSE:AQN) to hedge your risk.

Algonquin Power & Utilities

Algonquin Power fell along with the broader stock market in March 2020. Prior to its fall, the stock was rose to a high of $22.39 between January and February of this year. Now, the stock is more or less fairly priced at $18.46 per share.

Even better: the annual dividend yield is 4.46% at the current share price.

Investors consider utility stocks like Algonquin safe during recessions, because utilities are a necessary expenditure regardless of declines in economic activity. Maintaining a portion of your retirement savings in income-producing utility stocks is a good idea.

Algonquin Power and Utilities also owns renewable energy assets, making this stock a fantastic long-term investment. Renewable energy is the future. Disrupting innovations spark earnings growth and return value to shareholders.

Will the stock market crash again?

It is hard to say where the market is going to go from here. The stock market could continue to rebound among different industries. The worst-case scenario is that upcoming global economic updates could disrupt markets further, as analysts adjust earnings expectations downward.

The COVID-19 health crisis, quarantines, and social-distancing requirements have pulled down worldwide gross domestic product. Economic activity has slowed for airlines and the hospitality industry as well as oil and gas. Worse: already strained global trade relationships face even greater political hurdles.

The stock market could be headed toward more volatility going into next year. The question investors like yourself should be asking is, “Am I prepared no matter where the market is heading?”

Be comfortable with your portfolio risk

If your chest tightens at the thought of another stock market crash, pay attention to your feelings. Then assess the risk to your portfolio. If you don’t feel like you can weather another stock market crash with patience until the value of your investments rebound, then reassess your financial situation.

There’s nothing wrong with keeping aside cash for buying opportunities or simply to have an emergency fund available to ease your financial concerns. In fact, that’s the recommendation today by top analysts like Jim Cramer.

Stock market investors can ease the stress of investing by reminding themselves that they have the cash to get them through the next year if the market does struggle. Moreover, if there is another dip in the stock market, investors can better use it as a buying opportunity if they have cash on hand to buy stocks.

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 Debra Ray has no position in any of the stocks mentioned.

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