Tags: Consumer Staple,  Alpha, Beta, Investments, Stock Market

Investing in Consumer Staples

August 1st 2020

Consumer Staple,  Alpha, Beta, Investments, Stock Market

Consumer Staples as an Asset Class Diversifier

 

Investing in Consumer Staples is an important asset class diversifier.  Consumer Staple investing has a few major ways it adds alpha efficiently to a diversified investment portfolio.

 

Alpha is a term used by investment portfolio managers, investment analysts, and investors to show how they can beat the index they are tracking.  If you perform better than that index you are tracking then you have better alpha. In other words alpha is just another name for returns.

 

Beta is level of risk and resulting volatility.  In a diversified portfolio you want to add alpha at only the amount of beta you need. Most investors don't realize there is actually a name for this and it's called the efficient frontier. The efficient frontier shows us the maximum alpha we need for the lowest beta. Why take on more risk when we don't have to and can still achieve the same returns? This is one way advisors pay for themselves because the great ones are performing better than you 100% do it yourselfers. however you don't want to work with a securities broker because these advisors who only charge commission are limited in what they offer; as well as typically are scewked to recommend what pays more.

 

Boracchia Wiviott Wealth Partners proudly sponsors this blog and always invests along the efficient frontier. Consumer staples inherently are defensive and as such tend to make investing at the right level of beta and alpha very efficient but we still optimize it with which exact stocks to buy. Through our investment subscriptions we'll tell you the exact stocks to buy and sell on a consistent basis. This way you are not over or under diversified, or in the wrong stocks. Efficient investing is what we specialize in of course along what you now know by definition is the efficient frontier.

 

With this in mind, you should never have 100% of your liquid money invested in aggressive growth stocks because it is going to be inefficient for the risk you take. In other words the returns will not be optimized efficiently. You want to spread out that risk by utilizing various different investments that have inverse correlated price movements. This way the overall volatility of your investment portfolio is more balanced or efficient on a day to day basis. 

 

 

The Consumer Staple, Real Estate & Utilities Portfolio Performs in Every Economic Cycle

 

This is exactly why we invest in the Consumer Staple Investment Portfolio of stocks.  The holdings we advise for consumer staples, real estate and utilities businesses perform at any aspect of the economic cycle.  Whether we are in an expansionary or stagnant phase; people need consumer goods.

 

During expansionary times it is obvious that more people have additional income because consumer spending increases. Businesses and individuals will then buy more food or household products. But even in recessionary times these items are necessary for daily life, making them what's known as defensive strategies that pay dividends during all market cycles.

 

Of course, Consumer Staple corporations don't perform as well during a recession or a decline in the economic cycle as they do in expansionary, but people still need for example their food and cleaning products.  

 

As we reviewed, consumer staple companies are viewed as a defensive sector in the stock market.  Investing in these typically behemoth corporations will provide a nice hedge especially if costs of materials and commodities go up. In periods of inflation as this is known, they can simply pass on the additional costs to the consumer. So they are defensive.

 

As you can tell by the term defensive, consumer staples have a stickiness fortress balance sheet and some of the stocks in my Consumer Staple Portfolio have a Return on their Assets of greater than 30%.  This return makes Consumer Staples an amazing business to invest in. 

 

Some of these companies you are unaware of, but you literally use their products everyday.  These massive companies own hundreds of brands and Investing Profits Pros by Boracchia Wiviott Wealth Partners has 60 analysts. Together we take time doing cutting edge research with our innovative resources to connect all these brands. We package our findings up in an easy to take action on stock market subscription service.

 

Subscribe to our Investing Profits Pros DIY Investing portfolios and we'll tell which stocks or cryptocurrencies to buy or sell right now.

 

 

Consumer Staple Investing is a Warren Buffet style of investing

 

He loves fortress balance sheets and companies that can even perform well in Recessionary or Depression environments which many of the stocks in our consumer staple investing portfolio have.  Additionally, Buffet likes well known brands that are embedded in our consumer culture. 

Consumer Staple, Real Estate & Utilities Investing Stock Market Portfolio

Another major benefit of investing in consumer staple stocks is that these companies pay high dividends.  With the US Treasury 10 year bond paying an interest payment of less than 1% and Investment Grade Corporate bonds yielding on average lower than 3%; Income Investors are searching for yield in the form of a dividend payment.

 

Investing Profits Pros Consumer Staple Investing Portfolio has stocks that are paying more than 5% and a few even higher than 10% in dividends. Investments returns are compound over time which means the dividends over 10 years produce significant income derived from your investment. 

 

With Savings account interest rates and CDs lower than 1% the defensive strategies that Consumer Staple, Real Estate and Utilities companies yield is some serious Alpha.  Of course you need to know which companies not just pay a high dividend but also have phenomenal business plans with unique products and services; strong balance sheet with manageable debt, and a top notch management team. 

 

 

The Fundamental Difference

 

There is a lot that goes into the fundamental investment research that Investing Profits Pros provides for each individual recommended stock.

 

When you understand the fundamentals of a business the risk in your investment portfolio is reduced. You get rid of the emotional worry of thinking one day the stock can drop 100%.  The behavioral management we provide allows investors to sleep well at night even if a liquidation phase of the stock market occurs like it did in March of 2020. You will want to buy more of these holdings once the dust settles and institutions begin buying consolidating the stock market and increasing volumes and prices of these stocks. Through our subscriptions we'll tell you when and which specifically. We keep our Investing Profits Pros clients updated.

 

Dividend investing is a great well to build and compound your wealth over time and is an important aspect of your diversified investment portfolio.  And Consumer Staple investing clearly provides this well. 

 

There are bad companies I would not invest in that pay high dividends.  The reason is some of these companies try to attract income investors, pension funds, and institutions by providing a high dividend.

 

But beneath the surface they are utilizing leverage to pay out this dividend and if the company does not have enough revenue to pay the interest, invest in the business, and run an efficient cash guzzling machine. When their bonds come due and they cannot pay their bonds back they go out of business. 

 

The Fundamentals Also Catch Debt Warnings

 

Debt is one of the major reasons companies fail. That is why fundamental analysis of each stock company is so important. Moreover, if you add some technical analysis and you have a magical investing strategy that can provide tremendous alpha in ones portfolio. 

 

Remember based on macro economic and political themes certain stock companies will perform better than others and there is no better time to reflect in these regard than the 2020 Coronavirus pandemic.

 

The Coronavirus Pandemic of 2020 has shocked the global economy with supply chains and daily lives being massively affected as we all know. And COVID-19 although devastating most businesses especially Restaurants, Hotels, Airlines, Dry Cleaners, Etc…. Increased the revenues of Consumer Staple Businesses. 

 

With everyone stuck at home quarantining no one was eating at restaurants, thus grocery stores were overwhelmed and products were flying off the shelves.  Remember the toilet paper wars we saw on social media. 

 

People went straight to doomsday and everyone was trying to protect their families and loved ones.  Thus, Grocery stores saw massive revenue increases. And those companies providing those goods saw their market share gain even higher traction. 

 

This goes to show that there is always a new trend emerging in the stock market even in the worst of times. 

 

In sum, Consumer Staple investing is an effective diversifier to a well allocated investment portfolio. Investing in Consumer Stocks have many benefits.  Begin investing today at investingprofits.pro to begin adding this sector to your investment portfolio.  Every stock has been heavily researched and a suggested allocation to each individual stock is provided. 

 

We help minimize the risk in your investment portfolio and gain returns efficiently.

Subscribe today and start building sustainable wealth.

 

The Boracchia Wiviott Wealth Partners is your leading registered investment advisory out of Los Angeles, CA and he innovators in accessible wealth management since 2013. Individually each partner started in finance nearly a decade prior.

 

The husband and wife team of Boracchia Wiviott Wealth Partners have been featured by Marketwatch among many other outlets as the trailblazers in DIY Investment Portfolios. Buy one or buy all, we'll ensure you know the proper amount of risk to take on in the stock market, as well as which holdings to buy today! To subscribe click that button below, your best life begins with us at helm.

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Lea Wiviott Boracchia, Co-Founder, FinancialPlans.Info and InvestingProfits.Pro, both apart of the renowned Boracchia Wiviott Wealth Partners

We are a registered investment advisory focused on accessible wealth planning for everyone. Our mission is to help women, men and people of all ages, races, locations, and anyone plan and secure their most successful future. We were originally established in 2005 by way of 3 firms before my husband Marc and I registered our independent advisory in California.

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