Disclaimer: *This article may contain affiliate links* I’m not a licensed investment advisor. Also, I’m not a tax advisor and this is NOT tax advice. Please talk to a licensed investment advisor before making any financial decisions. Please talk to a licensed tax advisor before making any tax decisions.
What is investing?
Investing means you are buying a little bit of a company, making you an owner. With a certain amount of shares, it allows you to have some say in the shareholder meetings. Receiving a dividend demonstrates that the company respects their shareholders and is paying them a portion of the earnings.
In addition, these dividends are seen as income, in which you can reinvest. This is a topic for another time. This means, that you never have to sell your shares unless you want to. Especially since they are paying you quarterly. This also saves you from capital gains tax which can happen when you sell non-dividend stocks, as this is the only way to earn money from those. These types of stocks do not pay in a recession, so when you sell during that period then you have lost money. If you keep the dividend stocks during a recession, chances are you will still earn money, even if they lower the payout.
When starting out it is best to buy index funds or ETF’s since they have multiple companies and you are only buying a portion of the company instead of one full-share. However, be careful with the fees that some of these funds charge since it might just take away from your dividend earnings.
When and if you are ready then you can buy individual stocks. I recommend either buying what you know and what you like. For instance, if you like Coca Cola products, then the stock (KO) might be ideal for you. They have also been around for a long time and they have diversified their product line meaning that it will be around longer. They have a quarterly dividend as well and even if the stock goes down, there is still income coming in. This will deter you from selling when it is low.
Whereas stocks with no dividend, your money is locked up until they either rise again or you sell at a (possible) loss.
Is it recession-proof?
No. Dividend stocks are not a recession proof-way to hold your money but if you are going to invest in the stock market, it is one of the options. As on the cusp of a recession, a company may decide to decrease or suspend their dividends as a way to fortify their business.
How can I start?
If you are looking to start investing. I recommend using Robinhood. If you use this link to sign up, you will get a free stock.
Anyway, when researching stocks it gives articles about that stock, as well as recommendations on Buy vs. Sell and it also tells you the average prices that other Robinhood users have paid. This might be a good visual for those trying to see if it is over vs. undervalued.
Robinhood also gives you the P/E ratio which I will discuss at a later date but it can also tell you whether or not a stock is over or undervalued. In any case, before purchasing, always research.