Investors would be forgiven for being disheartened at points in 2022 so far. Markets across the world have struggled over the course of the last 11 months amid roaring inflation, the war in Ukraine, and continued pandemic-related impacts. However, there is a silver lining.
Market downturns can provide ripper opportunities. Here's how I would capitalise on the ASX's recent suffering by investing in dividend shares for retirement now.
The S&P/ASX 200 Index (ASX: XJO) has fallen 4% so far this year. Meanwhile, the benchmark All Ordinaries Index (ASX: XAO) has dumped 6%.
Why I'd buy ASX dividends for retirement now
ASX dividend shares can generate passive income – that's likely especially important for those gearing up for retirement. And what better time than during a market downturn to snap up dividend stocks?
That might sound counterintuitive, but downturns can allow an investor to buy into quality companies for less than they otherwise would. There are likely some major bargains buried in the market's rubble right now.
Additionally, buying quality ASX dividend shares during a downturn could mean my portfolio comes along for the ride when the market recovers.
Of course, such a recovery is never guaranteed. Historically, however, the Aussie bourse has always returned to, and surpassed, previous highs following a tumble.
Another reason I would invest in ASX dividend shares during a market downturn is the opportunity to receive more shares than I otherwise might.
The cheaper the quality share, the further my hard-earned cash will go. And the more shares I hold, the more dividends I'll likely receive. That could see me enjoying a greater passive income during my golden years.
Not to mention, dividend stocks are capable of acting as an inflation hedge – providing returns faster than the measure can eat away at cash savings. That's another important factor to consider when retirement planning.
Here's how I would go about identifying quality ASX dividend shares to buy for retirement now.
How I would find quality dividend stocks trading cheap
Each person will have a differing opinion on what makes an ASX dividend share good quality. Personally, I look for companies with a competitive edge, a strong balance sheet, and a history of pushing through tough times.
When seeking out dividend stocks to provide passive income in retirement, I would also consider companies' dividend yield and payment history.
A high dividend yield might sound like great value for money but it could be hard to sustain over years to come. Meanwhile, a company that has historically prioritised dividends might offer greater surety of passive income.
That might mean I focus my efforts on blue chip shares, generally found on the ASX 200.
And, as always, I would be looking to build a diverse portfolio of ASX dividend shares so to de-risk my investments.
