Part 4/9:
However, he emphasizes that focusing solely on dividends may lead to underperformance compared to total market returns. This perspective serves as a critical reminder for investors: dividends are just one component of total investment return, and a well-rounded approach is vital.
Pros and Cons of Dividend Investing
Pros:
Less Volatility: Dividend stocks tend to be less volatile than other types of investments, as they are perceived as safer during market downturns.
No Sequence of Returns Risk: Unlike the 4% rule, investors relying on dividends do not have to worry about market timing every year. This reduces emotional stress and potential financial instability.