The average savings account pays only .50 percent interest with traditional banks and 1% with online banks. When you compare these paltry rates to that of dividend stocks the average is closer to 2.5 – 3%, wouldn’t you want to make your money work harder for you? The only reason money should be placed in a savings account at a traditional bank is if the money will be used within 1 year to buy something you are saving for, otherwise dividend stocks are very liquid and provide you a premium above any other alternative.
Take for example a stock like AT&T (T) depending at what price you purchase this bad boy, your yield will vary from 3-6% and is protected as long as AT&T is in business. If a number like this does not intrigue you or make you second guess why you have your money earning so little yield, then something is wrong. My example in this post is AT&T, which has been in business for over 25 years, but believe me they are not the only dividend stock out there giving away 3% plus in interest.
Argument For:
Let me put it in a different light for all of you today. Where do you think the bank who holds your money invest in? A light bulb just went on in your head, because they invest in AT&T bonds and Stocks. Just dig deeper and read an annual report from your local bank with information on where they invest. They are doing the same thing that they advised you not to do. Why because they want to use your money to make more money. By investing and loaning it out to other people.
Argument Against:
AT&T might go out of business and you will lose all of your dough. Yes with every investment, you have to calculate a level of risk. I tend to see it as why would AT&T pay me so much dividend income money if they were close to shutting down. The point I’m trying to make is you will have clear signs before a massive company like that goes bankrupt. Stock price falls, business lags, bad media press, cutting of dividend payments. If one of these things occur, sell immediately in order to protect your asset.
Some financial gurus advise people against investing in individual stocks. I think they give advice like this because they are protecting themselves from people who do not understand how investing works, thus providing the readers the safest and easiest investing option – Mutual funds and index funds. I get it these should be the first investing instruments you invest in, but after a few years it does not hurt to venture out and try owning a dividend champion. The list consists of many companies with over 50 years of non-interrupted dividend payments. If you want more research you can find a ton of information on the web for dividend investing. Some might be against it and others for it, but I say why lose so much possible income and buy a dividend stock.
Article stating what assets are important for any investor to become a millionaire. – Here (publicly held stocks are #3 on the list.
Comment if you own a portion of a company already or if you should consider dividend investing?
Rich Uncle EL
This post is my opinion only and should not be taken as financial advice.
