07 August 2014

Why Choosing a Dividend Play Stock is Better Than Growth Stock without Dividend?

Most of the traders in the stock market are aiming for short term capital gain. They always look for stocks that have potential growth prospect with high possibility of stock price uptrend movement. It has resulted the traders to focus mainly on capital gain that require them to spend more time on focusing the stock price movement. 

On the other hand, some investors prefer to have a "Safer" investment by focusing on dividend yield with moderate growth prospect. Their argument is that even if the market is hit by the crisis, they would still have certain return in that particular period. It makes them feel comfortable even the market has clashed. 

One of the examples is the REIT investment during financial crisis on year 2008 / 2009. Many investors would even accumulate more as their focus is on the more than 10% dividend yield at that point of time. REIT ends up perform much better than STI if dividend payment is included for comparison. 

During the market downtrend, it is very easy for traders to sell out their shares with the hope that they could buy it back at lower price. Some might later just hold cash until the market recovers for a long time. If you are the investors who focus more on dividend payment, you may not be easily affected by the market sentiment. In fact, you may even accumulate more for dividend yield that is 4 times more than the 2.5% CPF ordinary account return rate. 

It may change your mindset that, if the market share drops further, you could still be willing to buy more as the dividend yield is much higher compared to the normal time. 

1 comment:

  1. Well said Jack! I totally agreed to the statement.


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