Growth stocks are like a shiny new sports car- they look great from the outside but once you get under the hood, things might not be so perfect. If the car is not manufactured by a reputable company, it might not be reliable. The same holds true with growth stocks because there is no guarantee that they will hold their value over the years.
Industry sectors that are considered “hot” are often flooded with growth stocks. One has only to look back to Silicon Valley shares during the dot-com era to recognize this. Those stocks skyrocketed in value and they made a lot of money for people who knew when to sell. Unfortunately, some who did not were left in financial ruin when the sector went bust.
Do not put pressure on yourself to be an investment guru. If you want to invest in growth stocks, look for those that pay dividends. This way, even if the market starts to falter, you will receive income in the form of dividends to carry you through any rough times. Without this dividend payment, you could find yourself holding worthless stock certificates.
Growth can only last for so long and for some companies that is a short time. Very few companies have mastered the art of leveling off from a growth spurt without plunging into an abyss. It is better not to gamble on these odds because only a few of us will make a wise call with such investments.
We can make money from growth stocks but the best results come from those that pay dividends. When the market does poorly, we will continue to earn income through dividends. This allows us to hold shares until the market rebounds and we can sell them for a profit. Any dips in the market are therefore not as much of a concern.
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Dividend investing is the only way I invest, and here's why: dividend stocks create a secure, passive income, and are less risky than non-dividend investing.
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