When talking about Stocks most people out here think that buying stocks which give good returns will be better but there is some section who believes that having good dividend stocks in your portfolio is also better. My father has a portfolio which has more dividend-paying stocks than normal stocks. When I asked him about the same he said that the market can go up and down as well as the price of the best stocks can go down but having dividend-paying stocks gives you some cushion because it pays the dividend every year.
This dividend can be considered passive income and it's good for retirees because they do not have to sell their stocks for money but still get some money in their bank account. I am not saying that we should have only dividend-paying stocks in the portfolio that is a bad approach but having some stocks which pay a good dividend is actually good to have in your portfolio. Like I got around Rs 2500 in dividends last year which can be invested again in the market and thus, this is the way the compounding will work.
And we should not forget that these are stocks which means they can give good returns too which means you will get double the benefit, dividends which can be invested again as well as from the growth of the stocks. The growth might not be as high as other stocks but still getting both is equally good. Again before investing we should think about the pros and cons in your portfolio because if your portfolio is created for growth only then having dividend stocks is of no use so yeah again it depends on the individual too.
In my case, I have a mix of both having some growth stocks as well as some good paying dividend stocks (like the dividend yield of 11% or so) which is good and thus I will continue to invest some more on this types of stocks.
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This is certainly good advice when diversifying your portfolio. It's important to ensure that these types of stocks make up at least some portion of your investments; be careful with the ones you choose. I like having mutual funds which incorporate dividends, since I'm not experienced enough to make such crafted decisions myself.
Thanks for sharing this great, oft-overlooked advice! 😊
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