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Retirement savings: why the coronavirus bear market could boost your passive income

Buying stocks to make a passive income after a market crash can be a difficult process for any investor. There’s a realistic chance stock prices could move lower in the short run due to economic challenges that may lie ahead.

However, the high yields that are on offer across a number of industries may make equities attractive on a relative basis for income-seeking investors. Likewise, for investors who are seeking to build a retirement nest egg over the long run, the low valuations on offer across the stock market could provide buying opportunities that boost your returns in the coming years.

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Passive income opportunities

Investors who are seeking to generate a passive income from their capital today can now access higher yields in many cases than they could at the start of 2020. The recent market crash has caused a wide range of companies to trade at lower stock prices. This means their yields will have risen as long as their dividends are being maintained.

Some companies that are continuing to pay dividends in 2020 due to coronavirus, not impacting materially on their financial performance, have still experienced falls in their stock prices. Investor sentiment towards equities has declined over recent months, as investors have sought refuge in safer assets, such as gold, bonds, and cash.

As such, now could be the right time to buy companies that have solid finances and affordable dividends while they offer high yields. On a relative basis, they could produce high income returns that boost your passive income over the long run.

Building a nest egg

For investors who are building a retirement nest egg and don’t require a passive income from their portfolio for many years, now could be an excellent time to buy stocks.

The stock market’s track record shows it has experienced infrequent, but somewhat regular, bear markets in its history. They have been hugely challenging for investors at the time, since they cause paper losses in many cases. But the stock market has always been able to successfully recover from all of its downturns and bear markets to produce long-term growth.

As such, buying stocks after a market crash has been a sound strategy pursued by many successful value investors. Although it can produce short-term losses, should the outlook for the economy worsen and investor sentiment weakens, over the long term a recovery is highly likely. For investors who’ve a long-term time horizon, therefore, buying high-quality companies today could be a highly profitable move that increases the size of their retirement nest egg and passive income.

Risk considerations

Clearly, diversifying across a range of businesses to generate a passive income is highly important at all times. It is, however, even more crucial during periods of economic uncertainty where some industries can come under severe pressure.

Therefore, building a portfolio of stocks that operate in different sectors could reduce your overall risks, and strengthen your returns in the coming years. 

A top income share that boasts a reliably defensive business model… plus a current forecast dividend yield of 4.2% to boot!

With global markets in turmoil as the coronavirus pandemic tightens its grip, turning to shares to generate income isn’t as simple as it used to be…

As the realities of ‘life under lockdown’ begin to bite, many of the stock market’s ‘go-to’ high-yielding companies have either taken an axe to their dividend pay-outs… or worse, opted to suspended them altogether – for the near-term at least.

With so many blue-chip and mid-cap companies scrambling to hoard cash right now, where are we income investors to turn for decent yields?

Fortunately, The Motley Fool is here to help…

Our analyst has unearthed what he believes could be a very attractive option for income- seeking investors – a company that, in his view, boasts a ‘reliably defensive’ business model, combined with a current forecast dividend yield of 4.2% to boot!*

But here’s the really exciting part…

This business even has form in riding out this kind of situation, too… having previously increased sales and profits back in 2008 and 2009 when the world was gripped in the deepest economic crisis since the Great Depression.

*Please be aware that dividends are variable and not guaranteed.

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Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.