A Strategy to Beat Dividend Stocks

Just because dividend stocks have favorable characteristics doesn't mean that they're always your best bet. In particular, when you expect the market to rebound sharply, sticking with dividend stocks -- especially in defensively positioned industries -- can lead to subpar returns. But regardless of when stocks bottom out, the thing you should remember is that if you want to maximize your gains in the next big bull market run, the same dividend stocks that protected your portfolio from the worst losses are also quite likely to prevent you from earning the biggest profits.

To make the best investments, you have to know your objective. If you're ambitious and are willing to trade in and out of stocks to capture the best returns possible from any market environment, dividend stocks could hold back your results during major bull markets. But if you want to buy and hold stocks for the long haul rather than trading in and out of stocks, then the risk-reward profile of dividend stocks may be exactly what you're looking for.

Source: DailyFinance

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