The S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) is set to fall today after the US market dropped 0.7% overnight. It's been a period of unusual calm and low volatility recently. This scenario has helped the Dow Jones reach a fresh, new, all-time high, but some investors are wary and it appears they are ready to sell and lock in gains at the earliest signs that a correction might be coming.
More than likely, in the long term any correction will be a good buying opportunity, so investors with cash will be best placed. Investors owning solid, dividend-paying, blue-chip stocks will also be well positioned for three reasons:
Firstly, a reliable inflow of dividend income can provide the cash to make purchases during a market sell-off. Secondly, the defensive nature of blue-chip stocks can make them less volatile and thereby preserve your wealth which increases your options. Thirdly, blue-chips are more liquid which allows shareholders to trim a position if they want or need to. This liquidity benefit is important as it can allow an investor to switch into a more appealing stock opportunity as it arises during periods of volatility.
Four stocks investors could consider holding for their combination of defensive qualities and maintainable dividends are: Woolworths Limited (ASX: WOW), Wesfarmers Ltd (ASX: WES), Coca-Cola Amatil Ltd (ASX: CCL) and Transurban Group (ASX: TCL).
