How To Handle A Stock Market Sell-Off: 4 Smart Moves For Investors
The stock market had a difficult day. The sell-off began as the Consumer Price Index (CPI) report showed inflation is running hotter than expected. Treasury yields continue to climb, making borrowing more expensive for corporations, and mortgage rates have reached 7.50%, and the investor community is increasingly concerned about the Federal Reserve's next move. Stocks are selling off, and portfolios are flashing red.
Should I sell my stocks during a market crash?
When investors watch their hard-earned savings decline, the temptation to sell everything and wait for the uncertainty to pass can be overwhelming. After all, wouldn't it feel better to sit comfortably in cash while everyone else endures the bloodbath?
The problem is that selling is only half the decision. You must also figure out when to return to the market, and history has repeatedly demonstrated that this is a difficult ordeal. The U.S. stock market has successfully recovered from wars, terrorism, energy crises, political turmoil, pandemics, and much more. Yet, every market sell-off feels different when it is happening, and the uncertainty can make even experienced investors question their decisions.
Market volatility is inevitable, but how you react to it can have a lasting impact on your financial future. In this article, we discuss four practical strategies for navigating market sell-offs, protecting your long-term investment goals, and using the situation to your advantage.
Don't Try to Time the Market Bottom
Market bottoms rarely announce themselves. In fact, stocks often begin recovering well before the economic or geopolitical problems that triggered the sell-off have been resolved. By the time the headlines become reassuring, a significant portion of the recovery may already be behind us. The chart below shows that missing just the ten best trading days between 1996 and 2025 reduced hypothetical ending wealth by approximately 56%. Source
Hartford Funds
Investors waiting for reassuring headlines can miss a meaningful portion of the rebound. No one can put it better than the Oracle of Omaha himself.
“argument is made that there are just too many question marks about the near future; wouldn’t it be better to wait until things clear up a bit? You know the prose: “Maintain buying reserves until current uncertainties are resolved,” etc. Before reaching for that crutch, face up to two unpleasant facts: The future is never clear; you pay a very high price in the stock market for a cheery consensus. Uncertainty actually is the friend of the buyer of long-term values.” – Warren Buffett
Examine Business Fundamentals, Not Just Stock Prices
A declining stock price does not necessarily mean that the underlying business is deteriorating. During broad market sell-offs, even financially strong companies can experience significant declines as investors reduce risk, institutional funds rebalance their portfolios, and market sentiment turns negative.
As long-term investors, we must distinguish between a decline in the market price of an investment and a deterioration in its intrinsic value.
When a stock in your portfolio sells off, before you decide to make a trade, ask yourself these questions:
Has the company reported earnings? Review its latest results to determine whether revenue, profitability, and cash flow remain healthy.
Has management changed its guidance? A reduction in earnings or cash flow expectations may justify a lower valuation. However, if management has reaffirmed its outlook, the sell-off may have little to do with company-specific performance.
Is the dividend or distribution sustainable? For income investors, this is particularly important. Examine payout coverage, debt obligations, capital expenditures, and the company's ability to maintain its distributions through challenging economic conditions.
Has the investment thesis changed? Consider whether the broader economic developments materially affect the company's competitive position, or long-term growth prospects.
A 10% decline in a stock following disappointing earnings is fundamentally different from a 10% decline occurring without any company-specific news. The former may warrant a reassessment of the investment thesis, while the latter could present an attractive buying opportunity.
At High Dividend Opportunities, we focus on the cash flows generated by our investments and their ability to support sustainable distributions. Stock prices can change dramatically in a matter of days, even when the underlying businesses have experienced little or no change. Recognizing this distinction helps us make investment decisions based on fundamentals rather than fear.
Let Dividends and Compounding Work Through the Volatility
One of the greatest advantages of dividend investing is that you don't have to depend entirely on rising stock prices to benefit from your investments. Even when the market is declining, financially healthy companies continue paying dividends, preferred stocks can continue making distributions, and bonds can continue paying interest.
For income investors, these recurring cash payments provide flexibility. Retirees can use the income to meet their living expenses without selling shares at depressed prices, while investors who are still accumulating wealth can reinvest their distributions to acquire additional income-producing assets.
In fact, market sell-offs can make dividend reinvestment particularly rewarding.
Consider a stock that pays an annual dividend of $5 per share. At a market price of $100, its dividend yield is 5%. If the stock declines to $80 without any change to its dividend, the yield rises to 6.25%. The same $1,000 in dividends that previously purchased 10 shares can now purchase 12.5 shares, increasing the annual dividend income from those purchases from $50 to $62.50. This calculation assumes that the dividend remains unchanged. While dividends aren't guaranteed, a diversified portfolio of income-producing securities, including preferred stocks and bonds, can help reduce the impact of individual dividend cuts or missed payments on overall portfolio income.
This is the power of compounding through market volatility. Lower prices enable investors to accumulate more shares with the same amount of money, potentially accelerating future income growth.
Turn Market Fear Into a Disciplined Buying Opportunity
Imagine you live in a house that you love, in a neighborhood you enjoy. One day, two houses on your street sell for 50% below their previously estimated market values. Shortly afterward, a third house, comparable to yours, is listed at a similarly discounted price.
What would you do?
Would you immediately put your own house on the market, fearing that property values could fall further? Would you consider bidding on the discounted house? Or would you simply continue living in your home, knowing that nothing about it has fundamentally changed?
Of course, you would want to understand why neighboring properties are selling so cheaply. But if there were no material issues with the homes or the neighborhood, their lower prices could represent an opportunity rather than a reason to panic.
The stock market is no different. During broad sell-offs, investors often rush to sell perfectly good businesses simply because their market prices are declining. Yet, for long-term investors with capital available to deploy, lower prices can mean more attractive valuations and higher starting dividend yields.
Warren Buffett illustrated this beautifully using a simple example about hamburgers.
“If you plan to eat hamburgers throughout your life and are not a cattle producer, should you wish for higher or lower prices for beef? Likewise, if you are going to buy a car from time to time but are not an auto manufacturer, should you prefer higher or lower car prices? These questions, of course, answer themselves.” – Berkshire Hathaway 1997 Annual Letter
At HDO, we remain buyers of productive assets and see attractive opportunities during sell-offs like the one we are experiencing.
3 Income Investments To Buy During The Market Sell-Off
We all have our preferences. Even when it comes to coffee, we seek different types of roasts, sweeteners, and creamers. It only makes sense that we have different preferences when it comes to investing.
Some investors seek steady dividends and long-term capital appreciation. Others prefer floating-rate securities that offer higher payments when interest rates rise, along with priority over common shareholders. Still others seek contractual interest payments with defined maturity dates, when the principal is scheduled to be returned to investors.
Whatever your preference, market sell-offs can create attractive opportunities across these investment categories. Let's discuss three of our top choices.
NNN REIT Inc (NNN) – Yield 6.1%
NNN is one of the largest triple-net lease REITs in the United States, with 3,774 properties across all 50 states, leased to over 400 tenants. The REIT focuses on essential, everyday consumer-facing businesses, with 89% of its annualized base rent coming from services and non-discretionary retail. NNN ended Q2 2026 with 99.1% occupancy and a weighted-average remaining lease term of 10.1 years, providing excellent visibility into future rental income.
NNN maintains an investment-grade BBB+/Baa1 balance sheet and reported 5.9% YoY AFFO growth in Q2, despite the challenging interest-rate environment. The REIT also announced its 37th consecutive annual dividend increase, bringing its quarterly payout to $0.62 per share, representing a comfortable 69% payout ratio against the midpoint of management's full-year AFFO guidance.
Higher Treasury yields have weighed on NNN's share price, but its operating fundamentals remain strong. At the referenced price, investors can collect a solid dividend yield from an established REIT with a long history of growing shareholder distributions.
AGNC’s floating-rate preferreds – Up To 8.9% Yields
AGNC Investment Corp. (AGNC) is one of the largest agency mortgage REITs, investing primarily in mortgage-backed securities guaranteed by government-sponsored agencies. These securities carry minimal credit risk, but their market values are highly sensitive to interest rates. As long-term Treasury yields rise, agency MBS prices typically decline, putting pressure on AGNC's book value despite the company's use of interest-rate hedges.
However, rising long-term rates also create opportunities. AGNC finances its portfolio primarily through short-term borrowing, and a steeper yield curve can improve the economics of investing in higher-yielding mortgage securities. While existing assets experience valuation pressure, the company can gradually reinvest capital into securities offering more attractive returns.
We believe the current rate environment can support improving income generation for agency mortgage REITs, provided short-term funding costs remain manageable and mortgage spreads do not widen significantly. Nevertheless, AGNC’s preferred shares present a more defensive way to tap into the mortgage REIT’s cash flows, with its aggregate payout for 1H 2026 being one-tenth that of its well-supported common stock dividend. We will specifically look at AGNC’s floating-rate preferreds
AGNCM – Series D Fixed-to-Floating Rate Preferred Stock (Yield 8.4%)
AGNCN – Series C Fixed-to-Floating Rate Preferred Stock (Yield 8.9%)
AGNCO – Series E Fixed-to-Floating Rate Preferred Stock (Yield 8.9%)
AGNCP – Series F Fixed-to-Floating Rate Preferred Stock (Yield 8.8%)
Ticker | Details of Rate Reset |
AGNCM | 3-Month SOFR + 0.26% + 4.332% |
AGNCN | 3-Month SOFR + 0.26% + 5.111% |
AGNCO | 3-Month SOFR + 0.26% + 4.993% |
AGNCP | 3-Month SOFR + 0.26% + 4.697% |
With quarterly rate resets happening based on the Securities Overnight Financing Rate, these preferreds are well-positioned for potentially higher payouts as three-month term SOFR rises.
Adamas Trust Baby Bonds (ADAMO) – Yield 9.7%
Adamas Trust, Inc. (ADAM) is a mortgage REIT that invests in residential mortgage-related assets, including mortgage loans and mortgage-backed securities. This mREIT has been getting increasingly conservative, with a 53% allocation to government-guaranteed agency MBS, reducing its exposure to mortgage credit risk while maintaining liquidity. At the same time, the company’s portfolio grew to $11.7 billion (up from $8.6 billion last year). The mortgage REIT made three dividend raises in the past 18 months, underscoring the success of their renewed strategy.
For investors seeking contractual income with a defined maturity, we like the company's publicly traded baby bond, ADAMO (9.25% Senior Notes due 4/1/2031)
ADAMO carries a 9.25% fixed coupon, paid quarterly, with a $25 principal value and a maturity date of April 1, 2031. The notes can be redeemed at par beginning April 1, 2028. Unlike common and preferred dividends, interest payments on these senior unsecured notes are contractual obligations, and the debt ranks ahead of preferred and common equity in the company's capital structure.
While its market price can fluctuate with Treasury yields and changes in credit spreads, investors holding to maturity can receive the $25 principal amount without depending on a recovery in market prices, provided Adamas Trust meets its debt obligations.
Conclusion
Market sell-offs are an unavoidable part of investing. While the reasons behind each decline may be different, the emotions they trigger are remarkably similar. Fear encourages investors to sell, wait for clarity, and return when conditions feel more comfortable. Unfortunately, markets rarely make that process easy.
At High Dividend Opportunities, we believe that a diversified portfolio of quality income-producing investments provides investors with the flexibility to navigate these uncertain periods. Dividends and interest payments can continue through market volatility, while lower prices can create opportunities to acquire additional income at attractive yields.
Whether your preference is dividend-growth, floating-rate investments, or fixed-income investments with defined maturities, there are plenty of solid opportunities for those willing to look beyond the headlines. We cannot control the next market sell-off, but we can control how we respond to it.
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