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5 Ways to Survive the 2014 Bond Market Meltdown

If the prospect of losing up to 50% in value is scary, here's what to do

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Diversify with Dividend Stocks

If you own bonds, you are likely in the market for income. Yet during a bond market meltdown, you’re going to be losing principal, and that’s going to take a big whack out of your overall wealth. To avoid this, you’ll want to own other asset classes, and one of the best asset classes to own is stable dividend-paying stocks.

Here we are talking about well-known names, well-capitalized and cash-rich companies with a competitive advantage in their respective sector, and companies that make the kinds of products that will continue to sell no matter what the conditions are in the global economy.

These would be the corporate giants that pay solid dividends, and that have a track record of paying and increasing dividends each year. These are the companies that also pay an attractive dividend yield, usually in the 3% to 5% range. These companies also stand to profit from a flight-to-quality away from Treasurys and into stocks once the bond meltdown takes place.

An exchange traded fund that fits this bill is the iShares DJ Select Dividend Index Fund (DVY). This fund holds the biggest and best dividend-paying stocks in the market today. Shares of DVY performed beautifully in 2013, with a total return of nearly 25%. Once bonds begin the inevitable, i.e. their next big meltdown, look for capital to flee and find its way into the likes of DVY—and then just relax and collect your profits.



Article printed from InvestorPlace Media,

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