You’ve been there right, going through the mail and found the month end statement for one of your investment accounts. Just before the envelope is opened, the thoughts of “I wonder if I made money this month” fly through your mind. As you are opening the statement you are trying to figure out if the market for the past month has gone up or down, and without truly knowing, you decide it has gone up and anticipate seeing positive gains on your statement. With the statement now in hand you look only to find you have lost money. Frustrating isn’t it? The closer you get to retirement the more difficult seeing these losses become.
Dividend Stocks Are Like Watching Paint Dry
I can’t tell you how many times I have heard the talking heads of Wall Street say that dividend stocks are about as exciting as watching paint dry. However, dividend paying stocks can be one of the most exciting investments you can purchase if you approach them with a certain methodology.
What I am about to teach you can have a profound impact on your retirement income. Let me explain.
The following lesson assumes you understand how stocks pay dividends. For each share you own of a stock you get paid a specific dollar amount. For example, if you own 100 shares of ABC company and it pays $3 dollars a share per year, then you will receive $300 for that year. Regardless of the stock’s price. The stock price could be $10 a share or $200 a share. In either case, you will get $3 for each share you own.
Turning A Loss Into A Gain
No one wants to see the price of a stock they own lose value. Yet, shrinking stock prices of specific stocks may hold a secret that can greatly increase the “value” of your portfolio. Do you think a shrinking stock price can make you more money than a stock that is going up? Sounds crazy doesn’t it. Let me explain how this can happen.
We all want our stock prices to go up, but when stock prices increase, you are able to buy fewer shares then if the price stayed the same or decreased. If the stock prices stay the same or goes down, you are able to buy more shares than when the price goes up. The more shares you own, the more income you receive. You only want the price of the stock to go up if you are going to sell it. We have been programmed to think the only way we can make money is by the increase in stock price. The problem with this is when Wall Street crashes all that extra value can be robbed overnight. When you own stocks that pay dividends and Wall Street crashes, yes the value goes down but you still have purchasing power through your dividends.