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Investing Specialists

These Investments Provide Peace of Mind in Turbulent Markets

Morningstar.com readers share which of their investments are allowing them to sleep at night these days.

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These are tense times for investors. As of this writing, U.S. stocks are down about 9% for the year to date. While some sectors have suffered more than others, the sell-off has left few parts of the market unscathed.

We asked our readers what investment besides cash and cash equivalents has been their "rock" during the sell-off. Many readers replied that no single holding is their rock; rather, it's a well-diversified portfolio that allows them to relax during periods of market stress. Nevertheless, many others noted that they do, in fact, have particular holdings providing respite today.

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Allocation and Bond Funds
A trio of Gold-rated allocation funds earned repeat mentions: T. Rowe Price Capital Appreciation (PRWCX)Vanguard Wellesley Income (VWINX), and  Vanguard Wellington (VWELX). "Like many other responders here, I also like Wellesley," writes scotsailor. "This is a fund I go to not just during uncertain times but also when stock valuations are running high. Its long-term record through market cycles is hard to beat."

"When the stock market is in turmoil, a good counterbalance is needed such as long-term Treasuries," says hdw4567, who owns Silver-rated Vanguard Long-Term Treasury (VUSTX). Other bond funds earning multiple mentions from readers include Gold-rated Vanguard GNMA (VFIIX), Bronze-rated TCW Total Return Bond (TGLMX), Performance Trust Strategic Bond (PTIAX), and  DoubleLine Total Return Bond (DBLTX). "A portfolio of investment-grade municipal bonds" gives DrBobb peace of mind.

Dividend-Paying Stocks and Real Estate
"A well-diversified portfolio of dividend-paying stocks (2.5% yield and up) whose dividends have grown each and every year for a minimum of eight years (10-25 years preferred)" helps robandcindy2 rest easy. Others agree. Some get their dividend fix from funds such as Gold-rated Vanguard Dividend Growth (VDIGX), which vandy73 says "has done well long term and shows staying power even when cool heads run amok." Others say they prefer buying dividend-paying stocks, such as Altria Group (MO) and Southern (SO), outright.

Another asset receiving multiple mentions: real estate. "My home, I own it free and clear," helps Nittwit relax during volatile markets. "If all goes bad, I have a place to live until the taxman sells it out from under me." Others say that real estate exposure via securities is their choice. " Realty Income (O), because no matter what the stock market is doing it will continue to pay a monthly dividend," says Reti59.

The 'Aggregate Rock'
"I don't think there is any one rock, not even cash which takes a beating in times of serious price inflation," says retiredgary. "So we try to piece together an aggregate rock by holding investments in various classes of assets."

That's true for many readers. For instance, in addition to keeping cash in FDIC-insured savings and CDs, retiredtaxmgr keeps "investing in Vanguard index funds. The FDIC insurance gives me peace of mind. The well-managed and low-cost funds allow me to participate in the equity market for growth."

Tomas47 agrees. "It isn't the particular stock, bond, or fund, but rather the allocation as a whole that lets me sleep at night. My rock (I prefer foundation) is a strong, detailed investment policy statement coupled with the willpower to stick to it."

Susan Dziubinski does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.