These days, investors seem to be flocking toward safety. Thanks to rising trade woes and other economic risks, many investors are prizing defensive sectors. Investors are naturally drawn to sectors like healthcare, utilities and consumer staples in times of stress. After all, these sectors have typically provided steady earnings and high yields. Because of this stability, many of these sectors have been dubbed as ‘bond proxies’ or used as substitutes for fixed-income investments. This has been especially true during the last decade as rates were low.
However, investors may be luring themselves into a false sense of security.
It turns out that these bond proxy stocks may actually be riskier than we think. And in fact, over long stretches, many of them actually underperform. For dividend investors, this is important considering many income portfolios are loaded with these sorts of equities. In the end, a balanced dividend approach may still be best.
Take a look at some of the worst market calls of all time here.