For those just entering the stock market, investing their hard-earned money in a publicly traded company can be a scary proposition. The fear of how well the stock will perform and the prospect of losing money can tie a new investor’s stomach in knots, which is not entirely a bad thing. It is better for a new investor to enter the market a little apprehensive than to come in and just start throwing money around without a clue about what they are doing. While there is no way to totally take all the risk out of investing in the market, there are some conservative strategies for new as well as seasoned investors that can reduce some of the risks involved in investing in the stock market. One strategy that has worked well for many investors is dividend trading, which is simply buying stocks that pay a dividend per share to investors.
Dividend investing does not take all the risk out of investing, but should the share price of a certain stock drop, the investor still has the dividend coming from the stock. To some traders dividend investing may appear to be a boring strategy, however for those who prefer to invest and not just trade, it is exciting to see the dividends add up in their account. Some dividend stocks may seem to move sideways, with very little price fluctuation, but with every dividend payment, an investor’s cost basis for the security goes down by the amount of the dividend. Over time, a stable performing dividend stock could pay for itself through the dividend revenue produced.
Dividend investing is not a get rich plan, nor is it entirely failsafe, but it is a strategy that when implemented properly can help an investor increase his bottom line over the long term.