The great stock market crash caused by the coronavirus pandemic of 2020 is one of the worst in history. Experts are concerned that the situation will get progressively worse as the global recession settles in. That recession is also a matter of great concern for investors everywhere. All this considered, investing in Canadian stocks might be a smart decision at the moment.
Canada Vs. the USA: Which Stock Is More Promising?
As an investor, you might wonder why choose Canadian stocks over the options offered by the US. It’s a reasonable concern because US companies are clearly more profitable. In fact, you have a much higher chance of making a great break with US stocks.
However, you also need to remember that not every company is Tesla. Therefore, while stocks that can bring you great rewards exist in the US, they are hardly common. Moreover, America is entering the same great recession that’s affecting the rest of the world. This means that the chance of some companies suddenly shooting up to make their investors rich overnight is small.
The main concern, however, is that the US stock market of today is highly volatile. Again, this spells opportunity for some investors. However, the risks are incredibly high. One also needs to be very astute to try make the most of the currently unstable market.
Making returns from tech stock can only take you so far in this volatile situation. And this seeming opportunity might not exist for long. This recession will last, so making good investment choices now is crucial.
Investing in Canadian stocks, on the other hand, cannot offer high returns comparable to many US companies. But it’s less volatile, which makes it a smart choice for investors who prefer to be on the safe side. Therefore, if your goal is to grow your returns steadily and with a little less risk even in these times, Canada stocks seem like a good choice.
How to Invest Money in Canadian Stocks
Canadian stocks are mostly comprised of natural resources and energy companies as well as some banks and big companies. The country has a stable rate of inflation and its overall economic stability will definitely help during this recession.
There isn’t a strong research and development base in Canada and manufacturing there is also limited. You need to keep those factors in mind if you choose to invest in this type of stocks.
Canada is the country that offers a good solid selection of dividend growth stocks. This makes it particularly appealing for investments during a recession. Of course, there is no guarantee that another stock market crash won’t affect you. However, with such a solid foundation, your Canadian stocks portfolio should fare rather well.
To make the most of the opportunities offered by this country, you’ll need to develop an effective Canadian stock buying strategy. The simplest, yet highly efficient, method is to:
- Study the TSX60 carefully and sort it by dividend yield.
- Focus, and buy, the top ten. But remember to reconsider your former income trusts. You should remove those that don’t offer immediate benefits. Also, watch out for stocks with a volatile dividend history. You need to choose the most stable of all available options to reduce risks at this time.
- Hold your new positions for some time. Waiting for a year would be best. Then, rinse and repeat the entire process.
It might seem that reassessing and changing your portfolio every year is too much. However, the Canadian stock market is rather stable. Therefore, it’s unlikely that you’ll see many changes in that top ten list.
When looking for dividend growth stocks, be sure to choose ones that show dividend growth. Even if it’s small, you should use every opportunity to increase the yield.
Also, you should be cautious about buying the TSX stocks in bulk, at least at the moment. With the market so unstable, it might be too much of a risk. Spreading is the strategy to use now.
In Conclusion: What to Do About Canadian Stocks Today
The recession caused by the COVID-19 pandemic is already here. And it’s here to stay for a while. Every investor should be wary after the latest great stock market crash. However, you also need to look for stocks that minimize your risks.
Canadian stocks seem like a good option for this purpose. Of course, to build a fortune from them you’ll need to think very long term. However, it’s a viable strategy for getting some security at these volatile times.
There is no option for stock investment that’s completely safe now. Therefore, you need to be doubly-careful with your choices. When investing in the TSX, you should go for the best. Don’t try to catch some kind of extraordinary startup with an ocean of promise behind it. Instead, study the dividend growth history and buy stocks that you know have been doing good.