A surge of newly minted dividend growth investors has flooded into the stock market over the last several years. Their arrival has been driven in large part by necessity, as zero interest rates for more than six years running have forced many retirees and individuals living on fixed incomes that would have otherwise been parked in FDIC insured certificates of deposit into the stock market in a desperate search for yield. Fortunately, the stay for these generally low risk tolerant investors has been most fruitful thus far, as their time has been filled with nothing but steady gains with relatively low price volatility. Unfortunately, the generally placid environment for stocks over the last several years has for many of these investors also bred a false sense of confidence – in some instances outright hubris – for it has obscured the meaningful underlying risks that not only continue to fester under the market surface but have also been building the longer the current bull market runs. Given that many of these relatively new dividend growth investors have never experienced any other market circumstance other than rising stock prices, it is worthwhile for these same individuals to stress test their portfolios to ensure that they are truly comfortable with the risks that they are taking in dividend stocks today.
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