Dividends are considered the ones that enable investors perform well in both good and bad markets. Indeed, during hard times, such as the 1929 crash and the crisis of the 40s, 50s, and 60s, investors turned to dividend stocks due to the return dividends provided.
The interest for dividend stocks is a result of a change in the investing environment. Conventional passive growth stock has betrayed investors. Between 2000 and 2009 investors were significantly affected. NASDAQ growth stock index generated losses of 44.5%.
It is widely believed that with dividend stocks investors should not worry at all about short-term losses. However, that is not completely true in the real word. Loss of capital market may not allow investors to fund their retirement and may make them use all their income.
For years, investors believed in the conventional portfolio construction theory according to which asset diversification reduced risk to such extent that enabled investors to buy and hold. However, the theory became obsolete given investors experience, which showed that things are the other way about.
It is necessary to remember that investment approaches are not only applicable in good market cycles. They must work in bad ones too.
It is time for investors to focus on evidence that dividend stocks are paramount. They have to be the basis of every portfolio. Growth stocks should be set aside.
There are three fundamentals for investing in dividend stocks and they are the following:
1. Dividends do not cause high risks;
2. Dividends bring better returns to investors in favorable situations; and
3. Dividends boost positive results even when the market situation is not good.
Evidence about the results of dividend stocks can be traced back to the 1990s. At that time, investors who focused on dividend-paying stocks performed significantly well. They received high returns with the appreciation of prices and dividends proved to be profitable.
These same investors also found positive results between 2000 and 2002 with the bear market and in 2008 with the financial crisis. They do not lose everything as they would have had, should they have invested in growth stocks.
The cash flow return generated by dividends enabled them to keep on track and provided support to meet their goals.
An important issue about dividends is that investors do not have to pay high tax rates. The Hobs and Growth Tax Relief Reconciliation Act (2003) levies 5 or 15 percent depending on their income. Now, there are those who are pressing to increase the tax rate.
There are three important issues that are true about investing:
1. Most investors are concerned with the safety of their capital and have a low tolerance for volatility. This may cause panic and may make them turn to bailouts when they should not do so.
2. Investors should have an investment method by means of which they can manage the stock-related risks at the same time they receive profits. This will definitely do away with panic and bailout.
3. Dividend stocks provide cash flow and inflation protection. Investors should be able to combine them to remain in a steady position, create returns and achieve their goals.
The general consideration is that investors should be rewarded as they have to wait till stock prices appreciate and their capital remains in guard. The capital is the basis for growth or income.
Investors should have an investment program focusing on dividends and the company´s ability to build those dividends. Dividend investing is the cornerstone of investors’ wealth in time regardless of whether the market is good or bad.
The interest for dividend stocks is a result of a change in the investing environment. Conventional passive growth stock has betrayed investors. Between 2000 and 2009 investors were significantly affected. NASDAQ growth stock index generated losses of 44.5%.
It is widely believed that with dividend stocks investors should not worry at all about short-term losses. However, that is not completely true in the real word. Loss of capital market may not allow investors to fund their retirement and may make them use all their income.
For years, investors believed in the conventional portfolio construction theory according to which asset diversification reduced risk to such extent that enabled investors to buy and hold. However, the theory became obsolete given investors experience, which showed that things are the other way about.
It is necessary to remember that investment approaches are not only applicable in good market cycles. They must work in bad ones too.
It is time for investors to focus on evidence that dividend stocks are paramount. They have to be the basis of every portfolio. Growth stocks should be set aside.
There are three fundamentals for investing in dividend stocks and they are the following:
1. Dividends do not cause high risks;
2. Dividends bring better returns to investors in favorable situations; and
3. Dividends boost positive results even when the market situation is not good.
Evidence about the results of dividend stocks can be traced back to the 1990s. At that time, investors who focused on dividend-paying stocks performed significantly well. They received high returns with the appreciation of prices and dividends proved to be profitable.
These same investors also found positive results between 2000 and 2002 with the bear market and in 2008 with the financial crisis. They do not lose everything as they would have had, should they have invested in growth stocks.
The cash flow return generated by dividends enabled them to keep on track and provided support to meet their goals.
An important issue about dividends is that investors do not have to pay high tax rates. The Hobs and Growth Tax Relief Reconciliation Act (2003) levies 5 or 15 percent depending on their income. Now, there are those who are pressing to increase the tax rate.
There are three important issues that are true about investing:
1. Most investors are concerned with the safety of their capital and have a low tolerance for volatility. This may cause panic and may make them turn to bailouts when they should not do so.
2. Investors should have an investment method by means of which they can manage the stock-related risks at the same time they receive profits. This will definitely do away with panic and bailout.
3. Dividend stocks provide cash flow and inflation protection. Investors should be able to combine them to remain in a steady position, create returns and achieve their goals.
The general consideration is that investors should be rewarded as they have to wait till stock prices appreciate and their capital remains in guard. The capital is the basis for growth or income.
Investors should have an investment program focusing on dividends and the company´s ability to build those dividends. Dividend investing is the cornerstone of investors’ wealth in time regardless of whether the market is good or bad.
