Benefit from the power of dividends
In the game of Monopoly there is a card in the Chance deck that gives the player a free $50 windfall while selected. It’s a fun way to essentially get money for doing nothing. In the real world receiving dividends on investment money you’ve already set up is kind of like that, you don’t need to anything other wait for the company you hold stock in to pay you for the privilege of having you as a stock holder.
It’s not quite that simple but I offer a broad ranging suite of dividend and income products that access quality companies across all sectors and countries, these products are designed to harness the income and growth potential of dividends and emphasize solid long-term risk-adjusted returns.
While prices of stocks can fluctuate widely based on changing economic circumstances, dividends represent a stable source of income. These returns can be received in cash or reinvested in additional shares – the compounding effect of reinvestment over time can be very powerful – and I highly recommend all of my clients take this option.
Dividends are one of the simplest ways for a company to demonstrate its strength and stability. Historically, companies with a history of paying – and increasing – their annual dividends have outperformed the market. Moreover, studies show that companies with a focus on dividends can achieve higher earnings growth, which implies higher valuations and price returns for investors.
The dividend fund advantage
Here are, in my opinion the 3 Undeniable Reasons why dividends and dividend paying mutual funds and segregated funds should matter to you as an individual investor.
1 – Diversification
By having a suite of dividend funds, investors can tap into the $1 trillion in dividends paid globally each year. Investors benefit from expanded choice and diversification across different industries and countries.
2 – Dividend funds are less volatile than the market
Dividend and income equity funds have had greater returns with less volatility than the market over the long term. In the last 20 years, up to June 2015, Canadian dividend paying funds averaged a return of 9%, versus approximately 8.3% for the S&P/TSX Composite Index and 7.2% for general Canadian equity funds over the same time period.
3 – Fund pairing
A diversified portfolio helps to capture opportunities and manage overall risk. There will be times when part of a portfolio is performing well while other parts lag. Creating a mix of dividend and income funds may enhance diversification, allowing for an improvement in the overall risk/return characteristics of your portfolio.
What Should You Do Next?
- Review your fund choices to assess the level of value being provided over the long term
- Consider incorporating the use of dividend funds as a way to potentially enhance portfolio risk-adjusted returns and improve overall diversification to provide a sustainable income.
- Implement an appropriate strategic mix and capitalize on the benefit of holding dividend and income funds within the overall portfolio
Contact me at any time to scheduled a personal risk assessment and investment consultation.