Dividend Investors: Stay the Course
Nobody knows how long a bear market will last, or how steep it will decline. While there’s an average to each of those, every market will be different. It’s safe to say we’re not done with the current bear market, as the Fed continues to raise interest rates.
However, investors who follow a long-term strategy can be served by today’s prices. One simple and popular long-term strategy is to stick with dividend-paying stocks.
In order for a company to pay a dividend, it needs to have stable cash flows. This tends to occur in more mature companies, which also tend to be less volatile.
Those who buy dividend stocks while markets are down can best take advantage of the power of compounding, by getting a higher starting dividend. And dividend payouts tend to grow over time, even during bear markets when a stock’s price is down.
Over a long enough timeframe, most bear markets end up looking like a small bump on the long-term stock chart. That’s why it’s important to stay the course, even when markets look bad and a sea of red may tempt investors to sell out at the worst possible time.
Investors who put a little money into the market every month, and aren’t scared by the price volatility of stocks, will end up creating substantial wealth over time.