Market Selloff: How Canadian Beginners Should Invest

CN Rail (TSX:CNR)(NYSE:CNI) stock is a Dividend Aristocrat that should be bought, even when economies sink.

| More on:
Young adult woman walking up the stairs with sun sport background

Image source: Getty Images

Today, rates are climbing, and downside has hit almost every asset class out there, even “safe” ones like bonds and gold. Cash is also losing ground to 7% inflation. Meanwhile, your average stock has shed around 25% of its value since the start of the year. With such pain felt across all fronts, it may seem like investing is just a way to amplify your pain.

While 2022 has been an abysmal year for stock and bond investors (60/40 investors are likely feeling immense pain today), it’s worth noting that these unprecedented conditions won’t last forever. The last severe recession (in 2008) was horrid, wiping out trillions in wealth in a matter of months. But one of the best periods of economic expansion followed the downturn. If you held on for a few years, you not only recovered, but you likely thrived. And it didn’t matter if you picked your own stocks or bought the market averages.

2023 may be a recession year, but it may also be a year of relief rallies

Now, 2008 comparisons are sure to come in, scaring the wits out of investors. While I don’t think the next downturn will be nearly as bad, I’d argue that the upside and expansion that could follow the “reset” could be just as profound as the bear market fall it follows.

With 25% in downside in the S&P 500 already endured, we may be closer to a turning point than more of the same. Once the bull is set loose, it will roar so fast such that the gains will only be rewarded to those who held on before the fact. In times like this, we must consider upside risks while others concern themselves with downside risk, limiting losses and hoarding “risk-free” assets that aren’t as risk-free as they used to be.

In such a hostile climate, it can pay dividends to stay the course. As an investor, you’ve got a job to do. And that’s to build wealth by your expected retirement date. If you did get in the game with a multi-year horizon, you need not worry about this bear market. The only ones who should be worried are the speculators or traders seeking to make money over the next year or less.

CN Rail: Betting on a post-recession recovery

At this juncture, I like quality firms that have histories of recovering quickly from recessions. Think CN Rail (TSX:CNR)(NYSE:CNI), a railway titan that hit a blip in 2008, but winded up soaring in a way such that the crash is no longer as visible when looking at the longer-term chart.

Indeed, CN Rail took a hit, just like every other stock during the 2008 market crash. Once the tides turned, though, CN Rail was ready to reward investors with multi-bagger gains in the years and decades that followed. CN is a blue chip that can’t be kept down for long. Its moat is too wide, and its economic profits tend to surge once the economy is ready to grow again.

With CN Rail stock down around 11%, I’d pounce at the opportunity to buy. It may have more room to fall, but in the long haul, odds are that it’ll be well higher, dwarfing the 2022-23 selloff that will likely be unremarkable in 10 years from now.

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 Joey Frenette has positions in Canadian National Railway. The Motley Fool recommends Canadian National Railway. The Motley Fool has a disclosure policy.

More on Investing

Bank sign on traditional europe building facade
Bank Stocks

Are Canadian Bank Stocks Still Undervalued?

Bank stock are moving higher. Is it time to buy or wait?

Read more »

You Should Know This
Stocks for Beginners

5 Things to Know About Cargojet Stock in November 2022

Cargojet (TSX:CJT) stock should continue to see massive growth in the near and long term, thanks to long-term agreements and…

Read more »

Double exposure of a businessman and stairs - Business Success Concept
Dividend Stocks

Better Buy: BCE Stock or Enbridge?

BCE and Enbridge pay growing dividends with high yields. Is one more attractive today?

Read more »

IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT
Investing

TFSA: 3 TSX Stocks to Buy With the New $6,500 Room Limit

Canadians who are eager to utilize the new $6,500 room limit in 2023 should look to TSX stocks like Aritzia…

Read more »

Financial technology concept.
Investing

The Smartest Stocks to Buy With $20 Right Now and Hold Forever

Given the favourable market conditions and their growth initiatives, these three under-$20 stocks offer excellent buying opportunities for long-term investors.

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

2 Unstoppable Dividend Stocks to Load Up in Your TFSA

These two dividend stocks provide long-term passive income that comes out every month, thanks to lease agreements lasting over a…

Read more »

Doctor talking to a patient in the corridor of a hospital.
Tech Stocks

3 Healthcare Stocks to Buy for Long-Term Passive Income

Healthcare stocks provide exposure to an essential service sector. They are also the best for passive income in the short…

Read more »

potted green plant grows up in arrow shape
Investing

4 TSX Growth Stocks to Buy and Hold Forever

Here's why TSX growth stocks, and these four stocks specifically, are some of the best investments you can buy in…

Read more »