Why David Kuo Has Never Sold a Stock Through Four Crises

He follows a simple rule for stocks that stumble. When a stock breaks and stops paying its dividend, Kuo does not sell it. He puts it on what he calls the "naughty step" at the top of his portfolio pyramid and gives it time to recover. Businesses in transition often restructure, merge, or get bought out by a competitor, he said.

Kuo cited a REIT in his own portfolio that was hit hard by COVID-19 because demand for its space dried up. Management is selling off assets to right the ship, he said. The REIT is not bankrupt, Kuo said. It is simply sitting on the naughty step until it stabilises and resumes its role as an income generator.

Because the other 19 stocks in the portfolio keep churning out dividends, Kuo said he does not worry about one minor setback. A well-constructed income portfolio eventually throws off so much cash that finding new places to invest becomes the biggest problem, he said.

"You don't need a sell strategy when you have a sound buying strategy," Kuo said. By focusing on business quality, proper diversification, and steady cash flow, investors can build a portfolio that lets them sleep through any crisis, he said.