Investing rules are a dime a dozen and can be found anywhere from just about anyone. What is clear however that building a true nest egg requires a lot of time and diligence over the course of a lifetime. One widespread rule of thumb is that in your early years you should focus most of your money on growth stocks which have the potential to increase dramatically for many years. Many of these types of sticks will do well however many will fail. An alternative however is focus for a lifetime on stocks that pay dividends as these stocks typically have achieved a levels of security in which they are less in danger of failing down the road.
The trick to buying stocks that pay dividends however is not simply in looking for dividend paying stocks but to look for stocks who have consistently paid increasing levels of dividends for many years. The business strategy of these companies have typically been so successful that they have had the means to both grow and pay dividends which is what you really want in your investments. You want to own successful companies that have grown consistently over the years and have paid dividends in correlation with their success and growth.
The interesting thing to note when it comes to dividend stocks is that historical returns in the market as a whole are almost all of the gains above the level of inflation is due to dividends. This means that on average stocks which haven’t paid dividends have merely slightly outpaced inflation whereas adding in the dividends has taken market returns above inflation and spawned real growth in wealth.
If this is historically accurate then you should know that investing in growth stocks paying dividends should be the most reliable way to realize healthy stock appreciation. Diversification of your portfolio doesn’t only mean buying growth stocks or bonds or commodities but also in buying assets which appreciate on multiple fronts, both in price and in dividend payment. Once you realize the significance of this fact then all that remains is identifying these stocks and analyzing them for your best investments.