Building a dividend portfolio is not something you should try unless you understand what you are doing. You should not start investing until you have the knowledge needed to make wise choices. There are risks involved, these being mainly the effects of inflation and how the market is behaving. These can affect all portfolios, but the amount you could win or lose because of them depends on the mix of assets you have bought.
If you want your portfolio to provide you with an income, do not forget that the taxman will have his share of any profits. You are also likely to have good years and bad years and these are sometimes caused by decisions made by politicians.
Getting Your Portfolio Started With Help
When you are new to dividend investing it might be best to work with professional and reputable financial institutions that will have much experience in this area. You can be certain they will comply with all the laws and regulations, including verifying your identity. This is an important part of the fight in preventing money laundering. Netverify offers a low friction user experience, which helps to make the whole process simple and pain-free. They will be able to advise you about the yields you can expect, and how to avoid unnecessary risks when you are starting out.
You should diversify into several different industries. You need to protect yourself from the effects of oil prices dropping, for instance, or the coal industry suffering huge losses. The larger the spread of industries you have chosen the less likely this is to happen and the more protected your stocks are.
You should also diversify your stocks maybe over 25 to 30 different companies. It is always very tempting to put all your money in the company that is doing the best, but that can change overnight. Having stock in different companies will mean the likelihood of getting decent dividends will be greater and that a good level of return will be maintained.
Financial Stability Over Growth
If your long-term aim is for your dividends to provide you with an income, financial stability of your stocks is more important than growing your portfolio. It is brilliant if both occur, but to start with concentrate on buying the stock that will produce the best dividends.
If you look for companies whose dividends have increased in the past, you will generally receive a better yield from them. This is why dividends matter to all investors. Companies that have steadily raised their dividend percentages in the past tend to do so in the future.
The more you earn from them, the more you will have to invest in more stocks, which will increase the number of dividends you receive. The earlier you start to do this, the more your portfolio will grow, which was the whole aim to start with.
Think More Long-Term
If you are looking to make some quick money you should not even be considering the dividend amounts. Then you should be looking at the buying and selling processes and learning about the right times to do both.
If you want your stocks to give you an income you should be thinking more long-term. You do not need to watch every little movement of the stock exchange. You will sometimes get some losses and sometimes some gains, but you have to consider your portfolio has a whole and not be too concerned about each individual up and down in values. Over time, usually, you will make money and reinvesting it in more stocks will mean you will make even more.
Taking No Risk At All
If you are not prepared to take any risk at all you could hide your money under your mattress or put it in a savings account at your bank. The problem with both of these ways is that the true value of your dollars will be eroded by inflation. With interest rates so low you cannot get enough from a bank to make investments with them worthwhile, and the under your mattress scenario is just foolhardy.
With inflation being close to 3% and banks paying around the 2% mark for interest on higher amounts, that 1% difference will eat into the value of your funds. When investing in stocks you would generally expect to be making 4-5% return on investment, so it has to be a better deal.
As a general rule, if you are unsure about buying a particular stock, even after you have asked the opinion of the professionals, you should wait till something you feel more confident in comes along.