When it comes to any investment, there's always some risk of losses, and the two tips above should make that abundantly clear. And while owning a diversified portfolio of dividend stocks across multiple industries will help reduce that risk, there will be short-term market drops that can drive down the value of your entire portfolio. On average, we get a 20% or greater market correction every five years or so, and a recession every decade that can bring the market down even further, and keep it down longer than the more common "correction." The big takeaway here is that it's critically important to consider your investing time frame with your portfolio dollars. If you know you'll need to sell some of your stocks to generate enough cash within the next five years or less, you're probably overexposed to stocks. This is just as true for dividend stocks as any other class. The reality is, it's almost impossible to see the next crash before it's too late to get out of the market. And while your long-term investments can just be left invested and ride out the downturn -- while you keep collecting your dividends -- more short-term needs should be kept in cash or high-quality bonds or bond funds. You won't have the same upside potential with that money, but you also won't see the value of a stock you were planning to sell to pay the bills fall by 30% unexpectedly.