Money Glee Monday #36 - growth investing vs. dividend investing

Okay welcome to Monday or Sunday depending on where in the world you may be! Today we're going to get somewhat technical, although it is not our intention to confuse or send you to sleep with too much analysis ;)

This post was driven by reading a great friend of ours, Josh over at White Collar Freedom, who spoke about this topic with criteria in place. Check him out and give some feedback.

Dividend vs. Growth investing

First of all, what is the difference?

Dividend investing generally means that you're focus as an investor is to receive a payment or dividend from a company. These can also be re-invested to purchase more shares from a company. 

Growth investing focuses less on the dividend payment and more on the potential growth of a company. Growth in this context is measured on the share price increasing, which means that you are making money only if you sell, while a dividend payment is yours to keep or re-invest.

Now this is a very high level and fundamental look at what is involved however as we said this is not something we wanted to get too technical on for you.

Which one should you choose?

Before we get into which one you should choose let's show you where you should be if you know the answer to this:

In all seriousness, maybe you should be running New York if you know with 100% certainty where you're best to invest

In all seriousness, maybe you should be running New York if you know with 100% certainty where you're best to invest

We'd like to preface this by saying that the "right" way to invest is 100% a decision for you and hopefully a trusted adviser to make. Having said that here are a few questions you should ask yourself

  • Should you be investing in stocks at all? You're really got to ask this vital question on if you're risk tolerance will allow you to consider losing some or all of your money
     
  • What is your purpose for investing? Are you looking to support retirement or do you have 40+ years before you finish up working. While retirement in the Money Glee vocab isn't a word it may be a consideration for you
     
  • How long is your investing horizon? While generally an investment in stocks or shares is 5 - 10 years, a growth stock may be able to deliver upwards of 100%+ in 6 - 12 months. While this is an exception rather than the rule, a dividend based stock is unlikely to do this
     
  • How would you feel if you lost money? Searching for quick growth, what are you prepared to lose for this growth? While there are also no guarantees with a dividend focused stock generally these are seen as less "riskier"
     
  • What experience do you have and which advice have you taken from others? This is especially important if you have not invested in the market or are new to the market. Even the best athletes and executives have coaches to help them. Be careful who you gain advice from though and do your due diligence

We'll be back with a 

If you're looking for more great tips and tricks, check out Josh's blog here!

What has been your experience with investing?

Which areas do you struggle with when you want to invest?

Are you a dividend or growth investor?

Remember to live you Money Glee!