Dividend vs Growth Stocks: How Much Risk Should You Take?

Timestamps:
0:00 - Begin Here
0:30 - If You Had Invested in Tesla at the IPO...
1:32 - Dividend vs Growth Stocks
4:52 - How Much of Each Should You Have?
6:34 - If I were 18 Today
7:48 - My Ideal Holdings
8:30 - Three Things You Should Keep In Mind

Dividend and Growth stocks are just "stocks", or companies, that you can invest in. However, they're called "Dividend" stocks or "Growth" stocks because of their characteristics.

A company that pays dividends is typically more stable, has enough cashflow and cash on their balance sheet to pay out a certain percentage of their profits back to the shareholders (you for owning their stocks).

That's great and all, but dividend paying stocks are usually not known best for their appreciation of their underlying stock price.

You're mostly relying on the dividend as a source of passive income - and for that reason they're actually really great.

Some companies have been reliably paying a dividend for 50+ years now and when it comes to dependable income that you don't have to do anything for - that's perfect.

So now that we know the difference, well how much should we have allocated in our portfolio to each of these types of stocks?

There's no right answer when it comes to this, if you want to take on more risk, you're going to have more growth stocks, and if you want to be less risky, you'll want more investments like dividend stocks, ETFs, and Index Funds.

But let's actually talk about risk because, knowing your risk tolerance will better guide your own investment decisions.

First, the younger you are, generally - the more risk you can take. When you're younger, you want to be taking on more risk, that's because the younger you are - the more time you have ahead of you, which means the more opportunities you have ahead of you to make and earn income.

You also have more time to allow your investments to compound, so you can take positions in your portfolio that you know will compound and grow over time, and pick certain spots with the rest of your portfolio in order to grow it faster.

In general, now, this is very general, younger people should have a higher percentage of growth stocks in their portfolio compared to people closer to retirement.

So let's flip that, pretend you're 55 years old, and you want to retire in the next 10 years. Your portfolio could be comprised of mostly passive investments like safer index funds/etfs/dividend paying stocks, and a small % can be allocated to more growth stock or speculative plays.

So, what should you do, as an investor?

First, understand your risk profile - if you're riskier for your age, you can take on more risk and choose to select a higher percentage of growth stocks in your portfolio.

Second, make a hypothesis about where the market is going. Right now we're in a bull market that's lasted quite a long time, so dividend stocks tend to perform worse than growth stocks, but if we were in a bear market - growth stocks lose their value quickly versus dividend stocks are more stable.

Third, always diversify. This is your best protection against market forces and particular investments that do poorly.

Disclaimer: I am not a financial advisor, any investment commentary are my opinions only. Some of the products and services that appear on this channel are from companies that I have an affiliate relationship with, such as Robinhood, for which I recieve a small percentage made via those links, but it doesn’t cost you anything extra!

[humphrey]

I will NEVER ask you for your info or leave my phone number. Be aware of scammers. Also scroll back UP and tap the LIKE! Thank you SO much.

[Lemariecooper]

Private credit involves loans to private companies, often offering higher returns and diversification. Due to its complexity and risks, a financial adviser can help with due diligence, access, and risk management, ensuring investments fit your strategy and comply with regulations.

[cpz]

Makes me upset every time I think about how I could’ve started learning about investing when I was 18, not 30

[mrc]

I subscribe to the "I'm scared if losing money" belief, and as such. I'm 33% VOO and 67% VUG/VGT. I don't feel comfortable picking my own stocks, instead I just simply investing in a tech and growth stock etf

[JK-ztym]

Just a note for anyone interested. If you're looking at dividend stocks, the last thing you should look at is the dividend yield. You should focus on the dividend growth. If the dividend isn't growing don't buy it.

[josephjones]

Growth funds and only reallocate into dividend when u need stability.

[thegaminghole]

Get a growth ETF and a high dividend ETF, dont gamble on individual stocks unless you can afford to take big losses.
(also get an international etf like VXUS)

[danielreyes]

Are there any ETFs you would recommend that are known for paying out dividends?

[HichigoShirosaki]

I diversify across both growth and dividend stocks through etfs. I keep a target of 2% dividends average for my entire portfolio. I also have some individual stocks and in those I am very particular about having to see a consitent track record of price appreciation over time but i won't take any growth stock that cannor demonstrate it produces better returns than a dividend stock and it has to have at least some dividends. My reason for taking this moderate stance is because due to personal reasons, I may not be able to work until full retirement age and so I need stability. I need protection from down markets while also getting decent growth. I consider myself more of a moderate balanced invester who hedges against all scenarios.

[arthurgeorge]

Buy early and Hold till your old
Your growth stocks should grow and so does dividend earnings along with it

But it should be a fun hobby, not a life or death decision

[ThatFinanceShow]

Good vid, love this topic. The answer is so different for everyone. Has to be personal.

[ofiasdhfasoidfujasdfoh]

when you say growth stocks, do you mean only individual stocks? or does it include growth ETFs?

[jfizzle]

Your videos are so helpful. You explain things so well! Thank you! Subscribed! 👍🏼

[kairace]

Great video🤙🏼 Really cleared things up for me bloody hell

[bradhaaf]

Seems to me for younger people you'd want to go with dividends Because that will add on to your Annual income allowing you to qualify for higher priced real estate which you could then pay for with your dividends... Is this a strategy ?

[mirenny]

hey!! can you do a video explaining the Morning star style box?? your videos are always so simple to understand and i can't seem to find a video clear enough explaining it?? Thanks!!

[Jake]

Great video as always...still on the fence between growth & passive strategies...I have a substantial amount in both...but I may just take the dividends this month and put them on my mortgage...thoughts?

[dawgg]

Taking early notes from Warren as to the importance of sound asset diversification and risk management It can’t be overstated. I’ve been trying to grow my portfolio of $300K for sometime now, I would greatly appreciate any other suggestions.

[daddyland]

I've started to get back into checking the stocks every morning again so I think I'll do what you said and add some growth stocks. Thanks for another great educational video!

[princesscacpal]

can you do video on real estate investment? explaining REITS and comparing real estate investing vs investing in stocks. do you also have any book recommendations for beginners?