Stock Investing Strategies

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Advantages and Disadvantages of Dividend Investing

The majority of dividend investors will just go out and get a list of dividend stocks and then start buying with both hands. There definately are some huge advantages to this strategy.

So, what are the advantages? For one you get to make some extra cash flow. We all like passive income and if you have a lot of money lying around it can be tempting to simply put it into a strong stock that is paying out a healthy dividend and let it give you a steady income stream.

The other advantage of doing this is that the stock really doesn’t need to go up for you to be profitable. Of course getting into a strong stock that is likely to go up is always the goal of investing. But dividends help you out even if you miss that goal. Of course we always want an investment to increase in value, but if it doesn’t or goes up very slowly dividends can be a big help.

While dividend paying stocks have some nice benefits to them there are also some downsides. Not every stock that is paying you a dividend is worthy of being invested into. Just because a stock does offer dividends does not mean it is a great investment. This also works the other way around. Stocks that do not pay a dividend can still be great investments.

So, how do you fix this? The best dividend paying stocks are the ones that both pay well and are fundamentally strong. Instead of buying every stock that can give their investor an income it can also be worth it to look for stocks that have huge growth potential. If a stock is strong enough and has the potential to grow it can be a pretty powerful investment. If not then it may be something to stay away from.

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