Ideas on how to become rich: The Dividends Issue, part 3!
In the earlier two posts, I wrote about dividends and discussed the general idea of whether dividends would be able to make one rich. You can read about the discussion on dividend stocks in the earlier two posts here on this site.
In this third part, I write about a counterargument to dividends, which I will expand on in the next series on my site here. The counterargument is, of course, quite naturally - a growth strategy focusing on capital gains.
OK, when it comes to stocks, there are of course many approaches as we have seen already - technical analysis, fundamental analysis, and so on. In this series, I was looking at dividend plays. So here is the counterargument. Dividend plays may not be as good as a purely capital gains strategy.
Some of the really astute investors note that a capital gains strategy is not necessarily at odds with a dividend play. That's true. That's because sometimes you can find a stock that delivers quite a good gain over time in capital appreciation, while also giving out a good and reliable dividend. However, that kind of stock is quite rare. In fact, usually the stocks that are needed for a capital gains strategy are those that are riskier and usually give no dividends whatsoever.
The key point to note here is that capital gains are the way you get the huge capital base in the first case, if you are not already a high income earner, to pursue a purely dividend strategy! That is the rub. This means that if you are rich already, then using a purely dividend strategy where you reinvest dividends regularly would definitely work. However, for most of us, we do not have the sizable capital base in the first case, and therefore it would logically mean that a capital gains strategy would be the most appropriate strategy for us in the first case!
In the next post, I will be talking about the pros and cons of a purely capital gains strategy - and more on stocks and other favourite hot topics of mine (and yours too, presumably since you're reading this). Thanks for reading and cheers!
Ideas on how to become rich
