52-Year-Old Investor With $3.5M Invested, Up $850K For The Past Year Asks ‘Why Focus So Hard On Dividends?’
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Reddit’s r/dividendinvesting community offered a 52-year-old who has invested $3.5 million various reasons why it makes sense to invest in dividend-paying stocks.
The investor said they’ve been up 31% or $849,664, in the past year and noted their gains would not have been as great if they had focused solely on dividend-paying stocks.
The Reddit thread discusses the pros and cons of dividend investing. Some argue that dividends provide a reliable income stream, especially for retirees and can even help qualify for certain visas in other countries.
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Others believe that focusing solely on dividends can limit growth potential.
The consensus was that a diversified portfolio is key, with dividends playing a role depending on financial goals and risk tolerance.
Redditor bradyapba noted that JustBath is not the typical American investor – just 9% of households have saved $500,000 or more for retirement. Those people will likely need an income stream to cover expenses and avoid dipping into their savings, which is why dividend investing makes sense.
But with $3.5 million, bradyapba said JustBath likely doesn’t need to worry about an income stream.
Divgap suggests thinking of dividends as similar to earning rent from a property rather than solely relying on its value to increase. The approach provides peace of mind because receiving consistent cash payments offers stability compared to the unpredictability of stock price fluctuations.
Reliable dividend companies prioritize real cash payouts, unlike stock prices, which can be influenced by market sentiment or manipulation. They are also resilient to downturns and often continue to provide income, Divgap wrote.
For instance, during the 2008-2009 financial crisis, many Dividend Aristocrats maintained or increased their payouts even as stock prices plummeted.
“That’s why we call it getting ‘paid to wait,'” divgap wrote.
MafiasFinestTV views dividends as “guaranteed income,” even though they’re not guaranteed because payouts can fluctuate.
In retirement, the goal is to avoid running out of money, which makes dependable income streams essential. Dividends provide a passive form of income – you’re earning cash without selling your principal investments. This contrasts with relying on market gains, where a crash could lead to significant losses.
MafiasFinestTV said it’s important to note that dividends, a capital gains portfolio or real estate shouldn’t be your only investments.
A well-diversified portfolio, including cash, bonds and other assets, offers more stability.
RussellUresti offers a different perspective for retirees considering relocating to another country.
The redditor noted that many countries offer “passive income” or “person of independent means” visas, which allow you to relocate abroad if you can demonstrate a steady income. Dividend income qualifies as passive income for the visas, while selling shares typically doesn’t.
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