5 Tips for Young Investors Looking to Start Investing in Dividend Stocks

Jun. 13, 2011 8:45 AM ETDIA, SPY, QQQ, DVY110 Comments
Kevin Parker profile picture
Kevin Parker

Young investors rarely get involved in investing in individual stocks for a number of reasons. Whether it is a lack of money available to invest or the inability to navigate the stock market due to a lack of experience and knowledge, it can be difficult to start investing.

With that said, starting while young can be very fruitful in many ways. Obviously, your money has more time to grow, but even more, learning how to invest takes years and the experience gained from starting early can be very lucrative.

I believe dividend stocks are a great area to focus on for new and young investors because they tend to be less volatile, provide a slight buffer against loss because of the dividend, and most importantly, because the philosophy of investing in such stocks tends to be a more conservative long-term approach rather than trading for a quick buck.

Here are five tips for young investors to assist in the process of starting a portfolio of dividend stocks.

#1 - View Stocks As Ownership In Companies

Too few investors view investing more as trading pieces of paper, speculating that they can turn a quick profit. It's more similar to playing the lottery than buying stakes in companies. When you invest, that is exactly what you're doing. You are buying ownership in a company.

As such, you should approach investing entirely this way. Is the company one you want to own? Do you believe in the management, the product, the culture? Do you want to own this company for many years? How do you know?

#2 - Focus On Dividend Stocks That Increase Dividends Each Year

Find companies that pay a dividend and increase it each year. Your goal should be to accumulate a massive income stream versus massive share price appreciation. Cash flowing

This article was written by

Kevin Parker profile picture
Kevin is an independent investor. While mostly investing in low cost index funds, part of his portfolio is allocated in long-term growth opportunities and deep value opportunities.

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