When it comes to protecting your Tax-Free Savings Account (TFSA), investors should not neglect the lower-beta dividend plays that can better hold up when market panic inevitably hits. If you’re not yet ready for continued volatility, it’s probably time to think about playing a bit of defence for a change.
After the latest selling spree, investors who’ve trailed the TSX Index by a wide margin, which is pretty much flat on the year, ought to ask themselves why. Indeed, overexposure to the “hot” tech plays or concentration in overvalued U.S. stocks could be to blame for lacklustre recent performance.
Either way, I view the TSX Index as a less volatile, cheaper, and yield-heavy way to invest moving forward for those looking to improve their odds of staying away from the “blast radius” of the next vicious move lower. Sure, it feels like the market correction is over, with the S&P 500 on a four-day winning streak. However, I’d look to very steadily rebalance if you felt you were ill-prepared for the volatility spike we encountered in April.
Awful April for stocks: Don’t be so quick to sell before May
Whether the awful April we’ve witnessed paves the way for a manic May, though, remains the big question. In any case, growthy consumer staple stocks stand out as strong candidates to pick up while the TSX rallies, while the S&P 500 follows closely behind. For now, my money is on the TSX Index, which is long overdue to beat the S&P 500 in a full year.
Indeed, it is possible to invest through volatility without sacrificing too much in the way of longer-term appreciation. Defensive growth stocks do exist, and they could be key to helping you ride out tariff volatility with confidence rather than fear and dread.
Many pundits would suggest diversifying one’s portfolio across sectors and showing more love to those “boring” stocks that tend to be slow and steady appreciators under most economic conditions. Also, hesitant investors may wish to try dollar-cost averaging (DCA) over time to automate the investment process without giving one a chance to react on emotion.
Alimentation Couche-Tard
Consider shares of Alimentation Couche-Tard (TSX:ATD), a convenience retailer that can deliver for investors in the long term, potentially with less pain should another tariff tumble be in the forecast.
Alimentation Couche-Tard stock is staging a comeback after briefly plunging into bear market territory (a 20% fall). The stock is sure to be a major mover as we gain more clarity on what’s to happen with Couche-Tard’s offer to buy 7-Eleven’s parent company. Indeed, tariffs represent yet another hurdle that Couche’s managers may need to tackle if a deal is to be a success.
Either way, the stock is a great buy, according to many Bay Street analysts, who are upbeat on the firm’s ability to grow same-store sales, even without inking a deal to take over Seven & i Holdings. I think analysts are right to stand by the name, which boasts a durable growth profile and a low 0.81 beta, which entails a bit less choppiness than the market.
