Review: Hate Risk? You’ll Love These 2 Dividend Stocks
Articles like this one really bug me. They bug me because someone acted on what the author told them to do – and their retirement may very well depend on getting it right. This article is particularly egregious because both the presentation, as well as the actual content, are going to hurt people.
Let’s start with the presentation. What immediately jumps out here is the (strong) implication that you can reduce your portfolio’s risk simply by buying these two amazing stocks. It doesn’t work this way.
Trading individual stocks is incredibly risky, and it’s just asking for trouble. There are probably some situations where buying individual stocks can help reduce the level of risk in your portfolio, but that’s like saying there are worse things for your diet than ice cream.
It’s true, but it doesn’t make ice cream healthy.
But that’s not the really bad part. The presentation stuff can be blamed on editors and trying to drive as much traffic as they can past their ads (they have to keep the lights on, too).
The really bad part is the article’s worldview.
Dividend investing – or income investing, or whatever you want to call it – is a bad idea. The amount that a company kicks off through dividends is irrelevant.
If you’re planning on spending whatever comes off of the stock, there is no difference between receiving a dividend and selling shares. They are economically equivalent.
And if you aren’t going to be using the money immediately (and the money isn’t in a tax-advantaged account), well, now you have to worry about the taxes on your dividend income.
Also, for two stocks that are supposed to be for people who “hate risk,” 2015 wasn’t so great for them. The S&P 500 Index was pretty much flat (it was up 1.38% for the year).
However, both XOM and EPD had really rough years. XOM was down 12.79% for the year, and EPD was down a whopping 25.55% (this is what happens when you invest in individual companies that deal in commodities. I doubt many people were really happy with them – even if their dividend yield kept going up.
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