Good Morning Everyone. Today is the next post in our “Investing: The Ins and Outs of Dividends” series. Hopefully you have enjoyed our series up to now as we have discussed new investment strategies, why we should consider investing in dividends, what dividends are all about, as well as why companies choose to pay out dividends to their stockowners. If you ever have any specific questions about dividend investing please contact Green Panda anytime and we will be happy to respond to all questions. You can also connect with us on Twitter @GreenPanda.
Dividend Investing is very often compared to investing in Stocks, but the truth is that the two are not opposites; in fact they actually complement each other. Dividend Investing is a part of trading stocks. We can receive dividend payouts if we purchase stocks directly or we can receive dividend payouts of we purchase a portfolio of stocks indirectly through a Mutual Fund.
One of the advantages of Dividend Investing is that we can receive a regular income stream through the quarterly dividend payouts. Companies may choose to pay out dividends to their investors in order to encourage new investors to buy their stock. Every time that we (as investors) purchase the stock of a company it gives that company more money to expand their business through research and business development etc. As stockowners we own a little piece of the company.
Trading Stocks in Your 20s
There are two main reasons why people choose to trade stocks. The first reason is because we hope to buy the stock at a low price per unit and sell it at a higher price per unit. This investment strategy is trading stocks in hopes of Capital Gains. A Capital Gain profit (or loss) is the difference between the purchase price of a stock and the selling price of a stock.
The second reason why people choose to trade stocks is to receive a regular income stream through dividend investing. Stocks can pay out a quarterly dividend as well as a capital gain distribution at the end of the year. Investors find comfort in knowing they will still receive income in the form of their quarterly or annual dividend payouts regardless of how the actual stock unit price performs over the long term and regardless of how the price fluctuates on a daily basis.
Trading Stocks in your 20’s can be a great addition to your Investment Portfolio. So often young investors choose to invest in Term Deposits, Guaranteed Investment Certificates, or other guaranteed investments because we may lack the resources to learn about different investment options. However, the younger we are the more risk we can take on our investment portfolio over the long term; therefore guaranteed investments may not always be the best option if we are investing in our 20s.
If you choose to trade stocks in your 20s you can open a self service investment account with an online brokerage firm. Online Brokerage Accounts are self managed investment accounts which can be both a registered account for your retirement as well as a non registered account. There is no advice available to investors who choose to open a self managed Online Brokerage Account. However Online Brokerages off many online resources to help investors to watch the market movements, track our investment performance, and research our investment options.
Be sure to check out the previous posts in our “Investing: The Ins and Outs of Dividends” series:
Photo by OgilvyPRWorldwide
Tahnya is 30 years old and lives in Montreal Quebec. She graduated in 2005 from Concordia University, and she currently works for a major International Financial Institution. She recently launched http://www.mediamadam.ca/. You can follow her on Twitter @TahnyaP.