What was your routine this morning? Did you wake up, go in to the bathroom and wash your face with cleanser or soap? Did you shave? Did you put on deodorant? Perhaps you brushed your teeth with a new flavor of minty toothpaste! Since it is Saturday, it may be your day to clean. So you may have used some cleaning products this morning to mop the floor, clean the bathroom, do the dishes and clean up after the kids. If you are a female and like me, you may have put on a little makeup before you stepped out the door to run some errands. I’m guessing that you may drink a soft drink or perhaps a beer before Saturday is over. Are you getting the picture? You pretty much have the same routine and use some of the same products day in and day out right? Now think about it, even if the recession would get worse, you probably would still do your Saturday routine wouldn’t you?
Consumer Staples are things we use every day and typically it doesn’t matter if the economy is in a recession or is growing wildly – we still would use these items regardless. They include food, alcoholic drinks, soft drinks, prescription drugs, cosmetics, shampoo, razors, cleaners and other household products. Most people don’t cut back on these purchases in bad times – however some may trade down brand names to a cheaper brand if the recession becomes too steep for the pocketbook to handle. You may have heard some gurus on the street call these stocks ‘defensive’ because the companies tend to have stable earnings and this can help hedge your overall portfolio risk. Some consumer staples companies are multi-national giants that pay regular dividends.
Investors should have a well-diversified portfolio with investments that represent a variety of sectors. Various sectors are correlated with the overall market cycle. For example, if the economy would ever pick up significant steam, we all might have more discretionary funds to spend on leisure items. But for now, that isn’t happening and the recent unemployment report is a testament to that.
Now some gurus out there will tell you that you need to anticipate six to ten months down the road where the economy will be and position your portfolios in advance for it. So if you believe the economy will have a strong recovery in the next six months you might want to invest in those sectors that would benefit from the increase in consumer spending.
However, common sense should be telling you that the economy probably isn’t going to do a 360 turnaround any time soon and this recovery is pretty slow going. That’s why owning some consumer staples stocks, mutual funds, ETFs or investments makes some sense here. What’s even better is owning consumer staples that have a track record of paying stable, steadily growing dividends. Think about it, you get to continue with your usual daily routine of using products you like and if you’ve invested in those companies you may be getting paid a dividend on top of it. Now that is something to wake up and smile about in the mirror on a Saturday morning. :)
So, keep your Saturday rountine up but start thinking about the products you use day in and day out and how your portfolio might need to benefit from your routine as well.
MORE INFORMATION
Investors can Google the words ‘ why buy consumer staples’ and find quite a bit of info on investing alternatives and ideas in this sector. If you have a broker, he/she can provide you with information as well. You can also go to the NYSE site and search on ‘
consumer staples’.
ETF (exchange traded fund) providers have consumer staples investment vehicles available and typically they have fact sheets that will list the individual stocks in the ETF. This is also a great way to learn what stocks make up the sector. For example PowerShares has a
consumer staples ETF fact sheet.
Comments