Dynamic Duo Dividend Funds Offer Refuge from Stock Market

By: ,

Dynamic duo dividend funds are offering a refuge from the volatility of the stock market.

Investors worried about the stock market’s volatility may be comforted by the chance to invest in bonds through a dynamic duo of dividend-paying funds. The dynamic duo moniker may conjure up thoughts of the “caped crusaders” popularized in the iconic Batman television series in the late 1960s, South Korean hip hop rappers Choiza and Gaeko of modern times or, for music-loving investment guru Jim Woods, two income-paying bond funds he strongly recommends as an alternative to the up-and-down stock market.

Despite stocks roaring back off their lows prior to falling April 20 and 21, they remain at risk for a further drop, said Jim Woods, who leads the Successful Investing and Bullseye Stock Trader advisory services. The peril is heightened during the current bear market after its recent plunge of more than 30%, he added.

----ADVERTISEMENT----

Dynamic Duo Dividend Funds Feature Bonds to Flee Bear Market

The drop more than meets the minimum loss of 20% to qualify as a bear market. To help determine when to buy and sell stocks, Woods relies on time-tested indicators to guide him. As of the close of trading on April 21, the Domestic and International Plans he tracks remain in “sell” status, as they have since Feb. 27.

The merit to that approach is shown by using the S&P 500 as a proxy for domestic stocks to prove that since the Feb. 27 sell signal, his strategy dodged a nearly 25% fall through the recent low of March 23.

Chart courtesy of www.StockCharts.com

----ADVERTISEMENT----

“That means we successfully avoided that massive decline that took place in just over three weeks,” Woods said.

Paul Dykewicz meets with Jim Woods to discuss the latest investment opportunities.

International Fallout Averted with Dynamic Duo Dividend Funds

As for international stocks, the use of the iShares MSCI EAFE ETF (NYSE:EFA) as a proxy for those equities shows its all-time closing high on Jan. 2, followed by a recent low on March 23. During that time, EFA dove a stomach-churning 33.70%.

Chart courtesy of www.StockCharts.com

The market-timing strategy used by Woods in his Successful Investing advisory service also produced a sell signal in his International Plan on Feb. 27. From that date until the low on March 23, EFA crumbled nearly 26%.

In late March, he recommended the iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSE:LQD), offering a dividend yield of 3.80%, and the iShares National Muni Bond ETF (NYSE:MUB), with a dividend yield of 2.40%. The addition of LQD and MUB were made for one key reason — to profit from the latest Federal Reserve policies, Woods told me.

Chart courtesy of www.StockCharts.com

Dynamic Duo Dividend Funds Powered by Fed Policies 

A key reason Woods gave me for his recommendation of LQD came from the Fed’s unusual move to announce it would buy almost “anything” involving bonds, including Treasury, municipal and corporate debt instruments. The Fed’s massive move into markets is what most professional investors wanted and it helped the market surge strongly from the March lows, he added.

The Fed’s announcement that it would buy municipal bonds added to the merit of investing in MUB, Woods said. The fund has rebounded significantly in the past month, he added.

Chart courtesy of www.StockCharts.com

The dynamic duo dividend funds focus on a range of asset classes designed to provide investors with income and share-price appreciation. For investors looking to take cover from additional stock market drops but still benefit from a market crash recovery, these the dynamic duo dividend funds recommended by Woods could be good additions to an income-seeking investor’s personal portfolio.

Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street JournalInvestor’s Business DailyUSA Today, the Journal of Commerce, Seeking Alpha, GuruFocus and other publications and websites. Paul is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is the editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper. Paul also is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. Endorsements for the book come from Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Dick Vitale and others. Follow Paul on Twitter @PaulDykewicz.

 

X
Are YOU Ready for the Biden Disaster Plan?
"...It's worse than you think."
—Dr. Mark Skousen
X
Search Dividend Investor