But since the financial crisis ended, the stock market has managed to rise even as bonds have continued their 30-year bull market. Similarly, there’s no guarantee that stocks and bonds won’t drop in concert as well. Already, we’ve seen major drops in iShares Barclays TIPS Bond Fund (ETF) (NYSEMKT:TIP) and foreign SPDR Barclays International Treasury Bond ETF (NYSEMKT:BWX), and further losses are possible if uncertainty about the Federal Reserve’s next actions doesn’t get resolved in the near future.
3. Dividend stocks are safer than other stocks.
Like low-volatility stocks, dividend stocks have been seen as a panacea for income-seeking investors. When bond rates hit record lows, investors moved in droves to dividend stocks to replace lost income.
The income that dividend stocks produce does help ameliorate the negative impacts of downward-moving markets. But the fervor with which investors have bought dividend stocks has made them more vulnerable than usual to falling stock prices. Moreover, some high-profile stocks that have cut their dividends lately serve as a reminder that you can’t absolutely count on stocks to deliver on their promises of high income and safety.
Watch your back
Many investors erroneously believe that these three investment ideas will help protect their portfolios from a future downturn. That’s possible, but it’s also possible that they’ll fail miserably under the weight of too many people counting on their being true. Be sure to watch your portfolio carefully to make sure you’re not relying on investment ideas that won’t hold up to the next high-stress situation for the market.
The article 3 Investment Ideas That Could Get You in Trouble originally appeared on Fool.com and is written by Dan Caplinger.
Fool contributor Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Procter & Gamble.
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