Are Dividend Stocks Good Investments?

Bonds (and other forms of income-generating investments) are yielding very low rates. Duh! As a result, Americans are plowing a ton of money in high-dividend stocks and mutual funds. While doing this can result in a better yield for those needing income, it also comes with extra risks (mainly, the underlying assets can lost their value.) In other words, a dividend-paying stock isn't the same thing as a bond -- in many different ways.

Given the above, the WSJ suggest four tips for investing in high-dividend stocks and mutual funds as follows: 1. Diversify your income sources. To limit stock-related risk and boost income, plan to get income from a mix of bonds, as well as dividend-paying stocks. 2. Own some stocks just for growth. Most investors—even those who already have entered retirement—need the capital appreciation that stocks can generate to reduce the risk of outliving their assets. 3. Be mindful of fund costs. 4. Be sure you're comfortable with overseas exposure. One classic strategy for income-oriented investors—and the funds that cater to them—has been to blend U.S. stocks with European stocks, since the latter historically have had higher yields.

Source: Free Money Finance

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