Growth, Value or Dividends: What Works Best for Who
When I read a title to an article that says best dividend stocks to put $500 right now, I wonder how many people are putting such insignificant amounts into dividend stocks? If you for instance buy a dividend stock or ETF like DIV that yields currently around 6% a year that would only give you $30 worth of dividends a year or close to 1.5 shares if you reinvest your dividends. Hopefully, the stock or ETF increases in value as well, but it can also drop. Dividends are a reliable source of income if you have enough money invested in them to be consider income. Can you live on $30 a year? If you had a million dollars invested in an ETF like DIV you would earn around 50-60k a year, that might be income you could live on. Dividend stocks and ETFs are something to consider when you are ready to retire. If you are not at that point yet you may want to consider something that focuses on growth. I am not saying there are not any stocks or ETFS that pay a dividend I would not buy now, but the dividend would not be the reason just a plus. There are ETF’s and Mutual funds that focus on dividend investing and I would recommend those over buying single stocks.
Value investing is a mindset of less risk and a long-term hold for profits. If you think the company should be worth $100 a share comparing's its earning etc. To like companies and you can buy it for $50 a share, that’s value investing. Waren Buffet is a big advocate of value investing and so are many others. It is considered less risky because if the stock is already considered to be a value if the overall market pulls back, you should see less of a pullback in something that is already at a steep discount. In theory this should increase long term profits when the company is finally at the value that the investor thinks it should be at. There are ETF’s and Mutual funds that focus on Value investing and I would recommend those over buying single stocks.
If you are young and looking for somewhere to invest $500, I would stick to growth stocks or ETFs. Growth stocks are just that, stocks that expecting a lot of growth in the future. These stocks are more volatile than value stocks but over the long term can produce huge returns on your capital. When look at growth stocks think buying Amazon when it was in the hundreds and now around 4k. Amazon is hard to compare other stocks with, but you get my point, and the opportunity is what we are going for. There are ETF’s and Mutual funds that focus on growth investing and I would recommend those over buying single stocks.
I like living a simple life with simple investments, trading strategies, and hustles. To keep life simple (my investments simple) my portfolio is broken up between 4 separate mutual funds PRDGX, PRGFX, PRGTX, PRHSX. If I end up doing any trading, I will swing trade ETFs for multiple reasons. You can see my investing money for beginner's post and my holy grail trading strategy.
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