Dividend Stocks: Look Before You Leap

The big push today to get you to buy dividend-paying stocks is, like all fads or crazes, a temporary phenomenon that’s good for Wall Street but may not help build the portfolio you want to be able to count on for your future needs. The devil’s in the details. It’s true that corporate dividends in general are currently competitive with bonds and similar alternative investments and buying them might turn out to have been a wise choice. Problem is, you won’t know for sure until you actually need the money. As long as your time horizon is 10 or more years, you could very well reach your financial goals.

The red flag I’m raising is for those investors who may be contemplating moving money from one asset class to another or from one fund to another in search of current income without thinking through the risks, the hidden costs, and better alternatives. The current focus on dividend stocks, like every other new and improved Wall Street gimmick, is good for Wall Street and risky for you. Interest is building and it’s starting to feel like a potential bubble in the making.

Source: Forbes

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