Posted on | June 29, 2012 | Comments Off
You have probably heard the news that since the year 2008 investors’ retirement accounts have dropped by an average of 40 percent. Hopefully, you aren’t one of those who lost money.
Many investors have been trying to find their way back into the markets to restore their accounts and start seeing growth again. Others are still on the sidelines and checking websites where to compare savings accounts and money market interest rates. Those people prefer to reduce their risk for the time being.
As if things weren’t bad enough since 2008, the world is in turmoil as it watches the euro in the hope that it will not collapse. So many things are tied to the euro that if it collapsed, it would make these days look like the good old days. However, in spite of this potential global crisis, some investors see this as an opportunity for investing in dividend stocks.
According to them, it is not the time to throw in the towel but to take advantage of companies that are diversified enough to withstand the effects of the Eurozone on the world economy.
Dividend investing is putting money into a company that pays the profit out to its shareholders. That payment is called a dividend. Picture a situation in which you had a lot of money in dividend stocks that were doing well. The dividends from those stocks could be enough for you to live on and the stocks could still gain value.
There are many variations on how companies pay dividends, such as quarterly and annually and there are a number of kinds, including cash, property and stock dividends.
Should You Invest in Dividend Stocks During the Euro Crisis?
Just as with any other kind of investing, this has its risks. You should always do your homework and if you have a financial consultant, discuss your plans with them. With that in mind, investing in these stocks now could be very profitable for smart investors in the future.
Look at it this way; many stocks are on sale right now and it is a good time to take advantage of that. This includes U.S.-based stocks, as well as European stocks. This is not true across the board, though. It might not be the best time to invest in the Greek economy, as well as that of Portugal and possibly Ireland, although those three together represent only about five percent of the Eurozone GDP and may not affect a collapse.
However, France, Germany and the UK present good possibilities in electronics, engineering, insurance, oil, pharmaceutical and telecommunications companies. While the U.S. markets try to recover from their slide, some of those same industries with dividend stocks look good there too, especially utilities, including natural gas.
History shows that times of high market volatility are good times to be in growth investments such as dividend-paying stocks. However, dartboard investing during these times is dangerous, so you have to put your research hat on. You need to study fundamentals such as company background, assets, financial statements, growth, profit and everything else about a company that can help you make the right choice. You are looking for undervalued stocks that have good potential to rebound and flourish during and after the euro crisis.
At this time, you must have a long-term investment mentality. No one knows how things are going to turn out just yet. History shows, though, that the economy has always gone through cycles of good and bad and it has always bounced back.
However, that long-term mentality should not necessarily be one of buy-and-hold. That theory is why so many investors lost their retirement funds after 2008. If they had portfolio managers, they didn’t tell the investors to get out of the market. Learn how to manage your own portfolio.
So, what does the euro crisis mean for dividend stock investors? It means moneymaking possibilities. Aside from investing in dividend stocks, it is important to stay diversified by investing in a variety of vessels. Protect against the downside too, by having some of your money in other areas such as bonds, fixed annuities or mutual funds.
Don’t forget to check the balance of your investments every year and adjust them to fit your goals. These times require creative investment strategies and it’s your job to learn how to adapt and preserve your retirement funds.