6 Problems with Dividend Investing

6 Problems with Dividend Investing


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6 Problems with Dividend Investing
By:
02 Dec 2016
Business

If you pay attention to financial pundits and money blogs, you have probably heard at least a handful of "experts" praise dividend investing. Simply put, "dividend investing" involves investing in companies that offer cash distributions. Most dividend investors roll their distributions back into their investment to accumulate even more wealth over time.
 

Obviously, this is genius! I mean, who wouldn't want to earn cash dividends they can reinvest for a greater return?

Unfortunately, the allure of dividend investing is worse than smoke and mirrors; it's downright propaganda. Regardless of whether dividend investing has been trending lately, it's not the foolproof retirement answer it's made out to be. Here's why:

1. Historic Performance

Cash dividends sound great, but is the proof in the pudding? Unfortunately, all signs point to "no" since dividends fail the historic performance test.

A mountain of investment data exists to show how and why investing makes sense. Stocks, for example, have generated investment over-and-above inflation. However, dividend-paying stocks historically have provided lower returns than other types of stocks. The chart below shows exactly what I mean:


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Rahul Raj

Rahul Raj

This lazy StoryTeller forgot to write something about itself.


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