Dividend Season
Good day all. So I've been getting these emails all week about dividends I've received from my investments. I started a personal investment account about a year and a half ago and since then, everyone in my household has their own account, and yes that includes my toddler. So as a new investor, I've started to get acclimated to some of the cyclical events throughout the year and I've realized I am able to put things together when it comes to news, politics, fads, and money. So while everyone else is worried about "cuffing season" or "hoodie season" take a moment and read about how you can become a member of "dividend season".
First things first, you should open an investment account. There are a plethora of choices and I recommend trying a couple before you make your ultimate decision. Some of the investment accounts and apps available include Stockpile, Stash, Robinhood, Acorns, E*trade, USAA, etc. As I mentioned there are a slew of them. I've tried a few of these and my favorite is currently Stash. I feel like I have more control and flexibility with this account. Stash is also very beginner friendly which is another reason why I prefer it over others. Now Robinhood is also another one I use rather frequently, but it's a bit less flexible and still user friendly. Some have fees for each transaction, monthly fees, or none at all. Either way do your research so your decision is most beneficial for you. After finding the company that works for you, then you have to find the investments that work for you.
As I said everyone in my home has a separate account because we all have different investment goals. My son's goal is more long-term focused and most aggressive(he has more time to bounce back from a downturn). Mine is shorter term and still a bit aggressive(I still have a while before I plan to withdraw so I too have a while to rebound from any losses). My husband's portfolio is less aggressive with the shortest term because he does not have as much time to recoup any losses. These rules impact the types of investments we make as well. There are bonds, stocks, and ETFs as a few options. Each of these offer different rewards and are differently impacted by the performance of the economy. All of these are opportunities for you to lend your money to different companies for some sort of a return. So it's up to you to decide how you want to contribute and how you would best prefer your return.
Bonds are longer termed investments for which you pay a certain amount up front and the entity promises the agreed return at the end of the term. There are treasury bonds, municipal bonds, bonds from different companies, etc. These were popular investments that parents and grandparents used to buy for children. These are hard to cash in and it does not give the promised return if it is not kept to term. People consider this most reliable and conservative in terms of risk.
ETFs are electronic traded funds which are a collection of like companies into one fund. So one ETF includes fractional shares of different companies. For example if you want to invest in Twitter, Facebook, Snapchat, etc all at once, you can buy shares of the ETF that includes all of these companies instead of buying individual stocks in each company. This can be more economical for beginners. This also can hedge your gains and losses. If you are invested in Facebook solely and they have some scandal which causes their share price to tank, your investment tanks, but if you have an etf, which includes Facebook, if the scandal is isolated, you won't lose as much. This also works in the reverse so you might also reduce your gains this way as well, but it's all a gamble either way.
Stocks are portions of ownership into the company to which the stock belong. If you buy 10 shares of Netflix, then you own 10 out of the 6.6 million shares (rounded up) that exist for that company. Your 10 shares allow you ownership which includes voting decisions, you can listen in on investor calls, and other perks. Whatever price you buy the shares counts as your initial investment. The goal is for the company to use your investment to make more money, become more enticing to future investors, then that increases the share price. This increases the value of your investment, but keep in mind you don't have that as a tangible gain until you sell at that higher cost. So it's important to think about trends and whether to hold on or sell. It's supposed to be long term so you get greater returns.
So finding the companies and fields to which you want to invest is important because all of this stuff is globally connected. Meaning it is not good to put all of your investments in one area because there would be no cushion if that one field experiences heavy losses. For instance investing in retail companies and only retail companies may not be the best thing (unless your investment is in Amazon) because retail is shrinking and many stores are closing down and going out of business. If that is your only investment you too will shut your portfolio out of business without making changes.
Investing in stocks and ETFs are beneficial because some companies offer dividends. Dividends are periodic payments paid to the investors based on company performance or "cash" on hand. These are typically paid at the end of the quarter and thus as an investor you get alerts that you've received dividends. These are usually companies that are more well established and do not need the money to immediately re-invest. Companies like Nike, Target, Microsoft, and Starbucks just to name a few who do offer dividends. Others like Netflix, Facebook, Twitter, and Monster(beverages) do not pay dividends. This is because they are newer and the thought is you get your return on the increase of their share price as the company reinvests in itself and more people demand the stock making the price continue to increase beyond the price at which you purchased it. So instead of getting more money paid to you periodically your $5 shares increase to $10 shares because the price rose beyond your purchase price.
Let's get back to these dividends. Dividends are so great because it's like a little periodic bonus. The dividends are paid even if the share price does not greatly increase. So while being snuggled up and warm might feel good, receiving dividends is just wonderful. So now that we are wrapping up the 3rd quarter of the year, once again it's dividend season. Count the deposits as they are made to your account and consider them as a treat.
Comments