While Dividend Growth Investing (DGI) shifts the focus from capital gains to income, much of the basic tenets of investing remain the same. Whether practicing DGI or not, focusing on high quality companies in less volatile industries that have a proven track record of growth and shareholder friendliness will produce positive results for investors.
With this section, I plan to assemble a library of articles covering some of the important topics of investing and portfolio management that are useful to beginning investors, as well as seasoned veterans of the market.
Portfolio Weighting is an important part of building an enduring and successful portfolio. Becoming too concentrated on any one sector or any one individual company can cause undue risk to your portfolio if unforeseen events happen. For instance, those heavily invested in financials were hit quite hard in the 2008/2009 Great Recession, as were those with a portfolio of technology stocks in the 2001 Dotcom Bubble. More recently, oil & gas stocks were decimated starting with the fall of crude prices in late 2014.
Dividend Reinvestment is another topic frequently discussed by investors. Basically there are three options when it comes to dividends: Automatic Reinvestment, Directed Reinvestment, and Accumulation/Withdrawal.
Generally speaking, those in the accumulation phase will be either automatically reinvesting dividends back into more shares of the companies that pay them or pooling dividends paid and then directing them into a purchase of a new stock. Meanwhile, those at or near retirement will likely be withdrawing dividends for living expenses or accumulating them to build cash reserves for retirement.
Growth vs. Yield is another big question that I see for investors. Is it better to buy something with a high yield to get the guaranteed income, or buy growth that builds capital gains? Either method can produce results for investors, but one must be aware of their goals as well as their temperament with investing in stocks.