Why Collect Dividends When Buy and Sell is So Easy?
It is a fundamental question for all investors.
Especially now, with transaction costs being zero (namely, no commissions).
The Frame
All, or almost all, information concerning Wall Street focuses on Buying and later Selling. It is ingrained in our culture that the successful on Wall Street are the big traders who buy and sell in bulk.
Short attention is given to other methods.
Other Ways, High and Low
There are other way to invest. Some are even more risky than buying and selling in bulk. High risk is more than I will tolerate, so I stay away from options, for example.
The lowest risk is usually unrewarding. Consider a person who only buys Treasury obligations, and holds everything until maturity. They get their principle back, with interest, but in my view cannot even compete with inflation.
Passive But
Dividend investing rewards the patient investor because it takes time, has much lower volatility than buy-and-sell, and is taxed lower than capital gains. Reinvest dividends so use the law of compounding to make magic. And because it is a hands-off method of investing, it does not require as much attention, and therefore has lower stress. That’s my view.
Not As Much Excitement
Dividend investing has much less excitement compared to standard investing, and especially compared to the trending headlines. The latest technology outshines dividend investing.
Turning Down The Excitement
Is investing terrifying?
Is investing like going to a scary movie, where we think we might not survive the plot line? Should we expect to frighten ourselves near to death?
It does seem sometimes that people are “adrenaline junkies.” We thrill the adrenaline boost that a scary movie provides. I content his carries over to investing; we crave excitement, often to the detriment of our financial health.
We need to follow the crowd and hope we are not too late when we invest for excitement. The late ones to the financial party always lose, and the late-comers in a scary movie all get decimated.
That is why dividend investing appeals to me. No scary-movie excitement, No adrenaline. No fear. I just invest and let the dividends roll in.
Seeking returns or excitement? Let me know here.
The sign Please Do Not Howl was taken in a zoo. 2024.
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