I'm worried about my old age, so I started investing in stocks DAY 91 [A portfolio resistant to market crashes]
—Walking with Haru, Investment Record at Age 60, Day 91—
On Day 90, I found that INPEX was the stock closest to my criteria in terms of undervaluation from my watchlist.
The process of narrowing down the numbers is gradually taking shape.
But, I suddenly wondered.
Are the stocks I own now, and the ones I plan to own, capable of withstanding a downturn?
I realized that while I was chasing stories of growth, I had been putting off thinking about the downside.
Today, I found a video by someone with 30 years of investment experience who is already living off dividends, and I learned how to prepare for a market crash.
I think I'll apply those lessons to my watchlist.
〈Market crashes were inevitable〉
There was one phrase in the video that left the biggest impression on me.
“Market crashes are inevitable. The important thing is not to suffer a fatal wound.”
In the past, there have been many major crashes, such as the IT bubble burst, the Lehman Shock, and the COVID-19 shock.
Each one saw a decline of 20% to 50%.
It took anywhere from several months to several years to recover.
But every crash has eventually recovered.
Even the Lehman Shock, which was said to be a once-in-a-century event, reportedly returned to its previous levels in about two years.
🌸 Me: “It drops by 20% to 50% and still recovers... But the question is whether I can endure those months or years.”
🌱 “Every time there's a crash, media headlines stir up anxiety by saying ‘this time is different.’ But looking back, that pattern itself repeats.” —Haru
〈There seem to be four ways to prepare〉
The video introduced several ways to prepare for a market crash. I'll summarize the key points.
📚 Today's lecture notes (Crash countermeasures, 4 preparations + alpha)
Market crashes are inevitable. The goal is to 'avoid a fatal wound'
Past major crashes (IT bubble burst, Lehman Shock, COVID-19 shock) all eventually recovered, even if it took time
Preparation 1: Focus on holding financially sound stocks (companies with a high equity ratio)
Preparation 2: Diversify across sectors
Preparation 3: Keep a healthy amount of cash on hand (a market crash is also a 'bargain sale' where you can buy financially sound stocks cheaply)
Preparation 4: Keep an eye on the stocks you want during normal times
+ Alpha: Stocks with progressive dividends (a declared policy of not cutting dividends) serve as a benchmark during a crash. According to past data, the rate of dividend cuts was much milder than the rate of stock price declines
〈What about my own watchlist?〉
I had actually already checked for sector diversification.
The stocks on my watchlist are beautifully spread across industries: construction, telecommunications, resources, finance/leasing, printing, wholesale, and other products.
This part earned a passing grade.
The remaining two factors were the capital adequacy ratio and whether they have declared a progressive dividend policy.
I decided to check these one company at a time.
The capital adequacy ratio is listed in the "Overview" section of each stock's page.
To find out if they have declared a progressive dividend, I had to open the "Dividends/Shareholder Returns" page or the IR information on their official website and search for the dividend policy statement.
Unlike checking a single number, finding out whether a declaration exists requires searching through text.
When I checked them one by one, I found that the capital adequacy ratios for most of the stocks were at solid levels.
Although some stocks had lower figures, I realized that for industries like telecommunications and finance/leasing, the capital adequacy ratio tends to appear lower by nature of the industry.
Learning that you shouldn't just compare numbers in isolation was another takeaway.
Only two out of the seven companies had officially declared a progressive dividend.
One of them was INPEX. They had officially announced a "progressive dividend during the current medium-term business plan period" and a "total return ratio of 50% or more."
🌸 Me: "INPEX, it came up again."
🌱 "On DAY 90, it was the stock that came closest to the criteria in terms of being undervalued. Today, we've also found evidence from a different angle: its resistance to market crashes." — Haru
Capital adequacy ratio of 44.5%.
Officially declared progressive dividend.
Considering this alongside the mix coefficient of about 8.9 that I saw on DAY 90, INPEX was a stock that led to the same conclusion even when viewed from a different angle.
💬 Satsuki's question and Haru's answer
🌸 Me: "Does it really make that much of a difference just by declaring they won't lower dividends?"
🌱 "Whether there is a declaration or not represents the strength of a company's 'will.' It shows whether there is a management decision to protect dividends even if business performance deteriorates. It becomes a pillar of support for maintaining your mental state during a market crash." — Haru
〈What I understood best today〉
The axis for looking at whether something is undervalued and the axis for looking at whether it can withstand a market crash are different things.
And sometimes, even when you check with those two axes, you end up at the same stock.
Don't feel secure with just one perspective; try checking from different angles as well.
Building up that habit might be what creates my own 'stocks I can feel secure holding.'
🏅 Yesterday, I received a badge for 90 consecutive days of posting.
Next is 365 days. It's still a long way off, but if I keep learning every day until then, what kind of scenery will I see that is different from now?
That has also become one of the things I'm looking forward to.
I'll continue tomorrow, too.
📚 Click here for related articles for DAY 91
#CrashCountermeasures #ProgressiveDividend #SectorDiversification #InvestingInYour60s #RetirementAnxiety #InvestingBeginner #StartedWithAI #WorkingInTandemWithHaru
