When markets start to get shaky, one of the most common reactions from investors is to play defence. They start to panic and immediately consider selling TSX stocks and moving to cash, to reduce exposure, or just wait on the sidelines until things feel more stable again.
And while that might sound like the safe approach, it’s often not the most effective one because, at the end of the day, you’re still trying to speculate and time the market. Furthermore, sitting in cash doesn’t generate returns; it just avoids volatility.
That’s why, instead of trying to completely avoid market turbulence, a better approach is to focus on owning businesses that can continue to perform through it. That means investing in companies which generate reliable cash flow, provide essential services, and don’t rely on strong economic conditions just to stay profitable.
Those are the stocks that tend to hold up best when uncertainty starts to increase, and that’s exactly why certain TSX stocks can offer a lot more stability than most investors expect.
Source: Getty Images
Why certain TSX stocks hold up when everything else slows down
When the economy starts to weaken or uncertainty begins to rise, one of the first things that changes is how people spend their money.
Discretionary spending tends to drop almost immediately, which means people cut back on non-essential purchases, delay big decisions, and become more cautious overall.
That’s why many stocks across the economy can feel pressure when the economy weakens. However, not all companies are impacted equally; there are certain expenses that people simply can’t avoid, like housing and utilities.
And that’s why TSX stocks like Canadian Apartment Properties REIT (TSX:CAR.UN) and Emera (TSX:EMA) are some of the best investments to buy to help protect your portfolio. They tend to be much more resilient when markets get turbulent.
CAPREIT is one of the largest residential landlords in Canada, owning thousands of apartment units across major markets. And regardless of what’s happening in the economy, people still need a place to live.
So, while the stock itself can still be volatile in the short term, the underlying business remains highly reliable.
Meanwhile, Emera offers a similar type of stability. As a regulated utility, it generates predictable revenue from providing electricity and gas to customers because, just like housing, those are services people continue to pay for regardless of economic conditions.
Building a portfolio that can handle uncertainty
Although buying high-quality companies is always paramount, it’s important to understand that investing through volatility isn’t just about finding the most defensive stocks possible.
Because while stability is important, you still want to own businesses that can continue to grow and create value over time. And that’s exactly what both CAPREIT and Emera offer.
They’re not high-growth stocks that rely on perfect conditions to perform, but they’re also not stagnant businesses either.
They generate consistent cash flow, pay reliable income, and still have long-term growth drivers that can support share price growth over time. And right now, both stocks offer dividend yields above 4%.
That’s what makes them so effective in a portfolio because, instead of forcing you to constantly react to market conditions, they give you the confidence to stay invested and let them grow and compound over the long haul.
And that’s exactly the goal of long-term investing. You want reliable businesses that you can hold through different environments without feeling the need to constantly adjust your strategy.
Remember, the best way to deal with market turbulence isn’t to avoid it; it’s to be prepared for it. That’s how you invest for the long haul, not by reacting to volatility, but by owning the right businesses from the start.
