Mutual Funds Versus Dividend Growth Stocks

Discussion in '401k, IRA and Retirement' started by wyoung, May 6, 2018.

  1. wyoung

    wyoung New Member

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    Hi,
    I have a Roth IRA I've been investing in the last couple of years while I'm learning more about how to grow my money. I'm behind based on my age and goals, so I'm using a fairly aggressive strategy. I'm invested mostly in large cap mutual funds.

    My question is, the large cap funds I'm invested in are historically returning double digit percentages. However, even some of the best recommended dividend growth stocks are only returning less than 10%. I'm in this for the long game and not looking to "play" the stock market.

    So what would be the benefits, if any, investing in dividend growth stocks?

    Thanks in advance for any advice.
     
  2. JR Ewing

    JR Ewing Super Moderator Staff Member

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    Some people prefer to invest in dividend stocks even when investing to grow their money.

    Of course many people invest in dividend stocks for income in retirement... but those who invest in dividend stocks for growth are betting on dividends paid and reinvested giving them a higher total return than if they invested (in stocks paying little or no dividends) for pure capital appreciation (increase in share prices).

    I think the dividend reinvestment strategy is more conservative, since the higher flying growth stocks that are often younger companies tend to pay little or no dividends, and instead invest that money back into the company - research and development, expansion, etc.

    I think both approaches have merit, and either both or one or the other can certainly be used. I think there are many other factors that are important to look at in a company when one is investing for growth.
     

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