The stock market has been on the downside of the roller coaster for months as the correction turns into a bear market and retirement savings get hammered.
The advice here is to ride it out. That's particularly true if you're years from retirement. I'm not: I retired from my day job last December. My wife still works, and we're keeping up with our expenses and still saving some, and we're still buying stocks.
Those investments are taking place through her 401(k) in the form of target-date mutual funds that shift their asset mix as retirement approaches. And for me, that's by reinvesting dividends and buying more shares of income-producing stocks -- following three pieces of what I think has been sage advice for years.
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The first is from Peter Lynch, the legendary Fidelity stock picker who built the Magellan mutual fund into an industry titan: "Buy what you know."
Another is from Motley Fool founders Tom and David Gardner, who often say that you should buy great companies and hold on to them.
And the third is that you can't time the market. Historically, the stock market outpaces bonds and cash. But markets fall quickly, and when the time comes, the recovery happens in daily surges that even the savviest stock picker can't predict. For instance, one study of 20 years of market activity found that all the gains over that time could be attributed to just the 35 best days. How are you going to time that?
I'm still buying dividend-paying stocks
Following those three maxims, I've invested most of my savings over the years into mutual funds and -- when I ventured into individual equities -- dividend-paying stocks, primarily real estate investment trusts (REITs).
REITs own pools of income-producing real estate and are required by law to pay at least 90% of their taxable income to shareholders in the form of dividends. There are about 225 publicly traded REITs, and most focus on a specific business, such as retail, multifamily dwellings, industrial buildings, data centers, or mobile towers.
To me, that makes it easier to understand what they do, how they're doing, and (to a degree) what's coming next. For instance, the rollout of 5G and related digital communications technologies makes it easy to buy into the transition strategy of Crown Castle International (CCI -1.29%) to expand beyond its core cell-tower business into small cell nodes.
There are also the arguments that real estate investing tends to be a good hedge against inflation and that dividend-paying stocks can do better in a down market. Well, not in this one. As of this writing, the S&P 500 is down about 21% year to date and the S&P U.S. REIT Index is off about 23%.
Still buying after all these years: Here are some examples
And yet, I buy. My savings/investment portfolio and income are split about 50-50 between stocks and stock funds in one half, and bonds, bond funds, and annuity investments and income in the other half. That violates that old rule about subtracting your age from 100 to determine your investment mix. I should be 35% invested in stocks by that measure.
But I'm not drawing Social Security yet. I probably will when I reach full retirement age. But even then -- even with expected cost-of-living bumps -- I intend to count on dividend stocks to bolster our household income.
My favorites right now include a couple of monthly payers: Agree Realty (ADC -0.55%) and Gladstone Commercial (GOOD -0.45%). The former is a retail REIT that currently has a yield of about 4%; the latter focuses on industrial and office properties and is yielding just north of 8%.
I also plan to buy more Crown Castle stock, and I own and plan to add to Life Storage (LSI) in self-storage; hospital owner Medical Properties Trust (MPW -0.22%); and Alexandria Real Estate Equities (ARE -1.96%), the life sciences collaborative-campus developer and operator.
Those are just six of the 25 stocks I own. With one exception, these are all dividend stocks, and my holdings are now yielding roughly 5% or so. If any of these stocks slash or eliminate their dividends, I can quickly pivot out of them, and in the meantime, they continue to pay their way in my portfolio even with depressed share prices.
Indeed, those beaten-down prices are an opportunity to pick up more passive income at a bargain price. I don't intend to change my approach anytime soon. And heck, if I'm ultimately proved wrong about all this, my beneficiaries will be stuck with some income-producing stocks to decide about on their own!
