Dividend Investing vs Index Fund Investing

ByWealth Diagram

We have people fighting whether dividend investing is better or index fund investing is better. Or which one has a better chance to make you rich. However, The way I see it, you have four choices. You can do neither, you can do dividend investing or you can do index fund investing or you can do both.

We’ll go over the four choices and let you decided.

You can do neither

  • You can say good buy to financial freedom.
  • enough said

You can do dividend investing

  • It is a strategy that give the investors two sources of possible profit.
  • It give capital appreciation and dividend payments.
  • It’s consider active investing, since you picking up individual stocks.
  • It require research.
  • You have to keep up with the earning report, every 1-3 months
  • It can either, under perform the market or out perform the market.
  • It does not track the market.
  • lack growth or limited growth
  • All individual companies you choose pay dividends.
  • You only buy great dividend stocks, so no worthless stocks
  • you can choose where your money is invested. Only Good companies.
  • You can sell any overvalue stocks.
  • You don’t have to buy overvalue stocks.

You can do index fund investing

  • It is a ETF or a mutual fund that track the index of a specific bucket of investment.
  • It could track S&P 500, it could track the total market.
  • It’s consider passive investing, since you are investing in a buckets of investment.
  • it does not require research.
  • Set it up and forget it. You don’t have to keep up with it.
  • It track the index market.
  • It can’t under perform or it can’t out perform market, since it just track and mirror the market.
  • Major growth on some stocks
  • From the bucket of companies, there are some that pay dividends.
  • Bucket of investment has some worthless stocks, thankfully they eventually get delisted.
  • You can’t choose which companies your money is invested. You get good and bad companies.
  • You can’t sell any overvalue stocks.
  • By buying index funds, you buy all the companies in the bucket, this included overvalue stocks.

You can do both

  • You can invest in both of them. Make them part of your portfolio.
  • Dividend aristocrat ,they raise their dividends annually
  • May invest in market disrupts companies, Amazon, Facebook, Netflix, Google
  • Dividend index funds such as mutual fund and ETF

Notes:

Index funds is an investment based on a collections of assets. such as bonds, stocks, commodities.

Dividend index funds is an investment based on a collection of assets that pay dividends. Such as mutual funds or ETF.

Dividends is when a company give regular payment back to the shared holders instead of keeping it or instead of investing it into the company.

Shareholder is when someone buy a piece or share of a company that make that person a shareholder.

ETF mean exchange traded funds.

Mutual funds.

Now, start and adjust as you go.

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