So the question that we’re all asking is should I invest in dividend stocks during a stock market crash? And the answer is definitely yes! Dividend Investing During A Market Crash is a best move you can do in your investing life.
That’s what this article is all about, I’ll cover exactly why you want to invest in dividend stocks during a dip in the market. So that you can execute whenever they go on sale and that’s gonna make you a lot more money in the long term.
Hey my name is Michael Diasz Kirindage and I am NOT a financial adviser and this is just my opinion. Don’t take this as professional financial advice, Read this article and do some own research and come up with your own idea. All details in this article are gathered from my personal research.
Why it is better to invest in dividends during a market crash.
So let’s start talking about investing in dividends during a market crash (1). If you’re reading this article right now in March of 2020 then you are well aware of all of the ups and the downs. That we’ve been seeing in the stock market, because things have been crazy lately (COVID-19).
That’s just how it’s gonna be I think for a little while but hopefully it’ll stabilize. Then eventually we’ll get back to normal. But if you go back all the way to the beginning of the stock market. You’ll see through history that there’s always been ups and downs.
It’s very normal for the stock market to stabilize itself. And that’s just the way that it’s always been. That’s how it’s always gonna be obviously. It doesn’t feel good to lose money. It seems like every single time I’ve been opening up my retirement account lately.
It just keeps getting worse, but I know that everything’s gonna be okay. Because I’m in it for the long term and I’m not planning on touching that money for a very long time. Now even if the market is going down.
It’s actually a good thing if you’ve got some cash lying around. Because if you’ve got some extra money to invest. Now is the time that you can actually get into some of those companies. That you’ve always wanted to invest.
Because now they’re on sale technically because the market is lower than it used to be. On top of getting really good discounts on all the companies that you want to invest. Their dividends are also going to go up because their stock prices are going lower.
How it’s Work?
I’m going to explain how that’s working right now.
So the way that dividends typically work is that they’re paid out on a per share basis. Basically if a company was paying out 15 cents a share, and you owned a hundred shares of that company. Then you would get $15 as a dividend.
Because you had a hundred shares at fifteen cents each. Most of the time dividend payouts generally stay the same. Whether the market goes up or the market goes down.
Simple Math Explanation.
So basically if there was a company that you were looking at that was $100 a share. And then it went all the way down to $50 a share. But the dividends would stay the same. So you could actually invest in twice as many share for the same amount of money. Your dividend would actually double as well.
Because let’s pretend that you only have $500 to invest. And you want to invest in a company that costs $100 a share. They have a five percent (5%) dividend yield. Well because you only have 500 bucks to invest. That means you can only buy five shares of that company based on their current market value.
But if the companies value all the sudden drop to $50 a share. Then your $500 would actually get you 10 shares. That would essentially mean that you double your dividend to 10% as the yield. That’s because remember that dividends are paid on a per share basis.
Now if you own 10 shares versus 5 then you’re obviously going to get double the dividend. Because you have twice as many shares now. That’s just simple math and there is more to it. But hopefully now you guys can see why buying a dividend paying stock when the company’s a lot lower or when the markets lower.
Because you’re gonna get more return on your investment. Cause the stock price is lower when you’re buying. So if there are some companies that you’ve always wanted to invest with in the stock market. Obviously waiting until there’s a dip or a market correction is a really good time to get in.
Then you’re always buying low and then potentially selling high. That’s exactly what you want to be doing. So this is why Dividend Investing During A Market Crash is better.
Also remember that you always want to take on a long term approach to investing. So if you’re looking out even five to ten years into the future. Then that’s really good because if there happens to be a market correction tomorrow.
Then you’re gonna have enough time to fix it. But in reality if you needed that money in a week and there is a problem. You’re probably gonna lose money and that’s not how you want to invest. You want to make money when you invest and not lose money.
So this is my opinion on Dividend Investing During a Market Crash. Hope you guys learn something new. If you did please share this article with your friends.