O - What I Wish I Knew Before Investing In Dividend Stocks
2024-02-07 15:03:17 ET
Summary
- Dividend investing is a great way to build long-term wealth and financial freedom.
- That being said, it is far from easy.
- I share two of the hardest lessons that I have learned through painful personal experience.
Dividend investing is an extremely powerful way to compound wealth over the long term. Not only do dividend-paying - especially dividend-growing - stocks tend to outperform the market , but dividend investing also has additional benefits:
- It forces investors to focus on what matters most - fundamentals - rather than getting caught up in fads that come and go (see the rapid rise and fall of Ark Innovation ETF ( ARKK ) and meme stocks like GameStop ( GME ) and AMC Entertainment ( AMC ) in the wake of the COVID-19 outbreak as examples of this) or short-term stock price behavior obsession. Instead, dividend investors focus on growing their income streams over the long term, leading to greater patience and rationality in decision-making.
- It also helps investors to keep their wits about them when all others are losing theirs. During a sharp market downturn, many investors panic and head for the exits, whereas when the market is booming and going up day after day, investors tend to pile in recklessly. Dividend investors who are buying securities for the income that they throw off, can largely disregard whip-sawing market volatility and instead stay calm and let the dividends flow.