A recent study by Bespoke Investment Group, cited in Barron’s, might show the way to some heartburn relief. Bespoke generated a list of Standard & Poor 500 stocks ranked in order of nonvolatility. Nonvolatility was defined as the smallest variance between a stock’s high price and its low price over a ten-year period.
The ‘top ten’ list of least volatile stocks included WalMart, Kimberly Clark, Progress Energy, Johnson & Johnson, SCANA, Coca Cola, Consolidated Edison, H.J. Heinz, Kraft Foods and Waste Management.
The Barron’s writer opined: “The list offers a good cluster of equities worth owning by folks who get queasy from the market’s swells and slides. Collectively, this hypothetical portfolio, equal-weighted, would today yield 3.6% in dividend income and by definition would . . . weather any economic tumult that might experience. That, in effect, is a pretty good bond proxy, with relatively little downside risk in any kind of market seizure.”
Be Smart About It
Please know I am not advocating that anyone divide their nest egg into ten chunks and invest each chunk in one of these ten companies, although I will say that I’ve seen many investment strategies that would fare much worse than doing just that. But, for those who invest with current income as one objective and maybe nonvolatility of market prices as another, it might be worthwhile to consider taking one of your ten chunks – 10% of your total – and investing it in low volatility, higher dividend equities. Generally, those are the equities of companies that are considered ‘blue chip’ by any standard. If you’re not the type to invest in the securities of individual companies, there are funds out there that have income as a primary objective andinvest in these kinds of blue chippers.
The Barron’s article was directed toward “seekers of calm.” If your nest egg could use some calming, this approach might be worth some think time.