When a corporation makes a profit, a portion of this money often is given to the shareholders and this payment is known as a dividend. Typically, a dividend is given in the form of cash, but there are other options as well. Sometimes a corporation might pay dividends in the form of additional stock shares or even with a property dividend, which might translate to being a specific product or service, although this latter option is rare.
One way to earn dividends is to invest in a dividend mutual fund. A mutual fund is a highly diversified investment that includes investments in many different securities in order to reduce the risk of the investment. A dividend mutual fund is a mutual fund that invests in companies that issue dividends. While you can certainly invest in stock of a single corporation that pays dividends, a mutual fund's diversity creates a much lower risk of financial loss, which can be very attractive to an investor.
While earning a dividend once or more a year is definitely a huge benefit from a dividend mutual fund, there are a few drawbacks. The main drawback to consider is that the dividends are taxed by the government at a higher rate than longer term investments, such as the money you eventually take out of your retirement account. However, if you need an influx of extra cash during the year, earning a dividend can be a big help.
One interesting type of mutual fund to consider is an inflation dividend fund, which is set up to grow at a rate that is higher than the rate of inflation. You will find as many as 30 or more companies or holdings in the fund, spread among a variety of industry sectors, typically highly stable sectors such as oil, pharmaceuticals, telecommunications and food-related companies. The formula used by a fund manager would be to find companies that have shown a return on investment with high cash flow for at least 10 years that exceeds 10 percent.
You can also consider looking at investing in a fund that focuses on a specific type of industry, such as energy, or even focus on a single country or global region. Many Asian countries are experiencing strong economic growth, and there are Asia Pacific dividend funds that capitalize on this growth. These funds will include many industry sectors with solid returns on investments from many different countries in the region, including Hong Kong and China, Malaysia, Thailand, Taiwan and several more.
One benefit to mutual funds in general is that they are managed professionally, which saves you the trouble of finding solid investments and monitoring the investments daily. Talk to your broker about the many different dividend-paying options that you might want to consider.
One way to earn dividends is to invest in a dividend mutual fund. A mutual fund is a highly diversified investment that includes investments in many different securities in order to reduce the risk of the investment. A dividend mutual fund is a mutual fund that invests in companies that issue dividends. While you can certainly invest in stock of a single corporation that pays dividends, a mutual fund's diversity creates a much lower risk of financial loss, which can be very attractive to an investor.
While earning a dividend once or more a year is definitely a huge benefit from a dividend mutual fund, there are a few drawbacks. The main drawback to consider is that the dividends are taxed by the government at a higher rate than longer term investments, such as the money you eventually take out of your retirement account. However, if you need an influx of extra cash during the year, earning a dividend can be a big help.
One interesting type of mutual fund to consider is an inflation dividend fund, which is set up to grow at a rate that is higher than the rate of inflation. You will find as many as 30 or more companies or holdings in the fund, spread among a variety of industry sectors, typically highly stable sectors such as oil, pharmaceuticals, telecommunications and food-related companies. The formula used by a fund manager would be to find companies that have shown a return on investment with high cash flow for at least 10 years that exceeds 10 percent.
You can also consider looking at investing in a fund that focuses on a specific type of industry, such as energy, or even focus on a single country or global region. Many Asian countries are experiencing strong economic growth, and there are Asia Pacific dividend funds that capitalize on this growth. These funds will include many industry sectors with solid returns on investments from many different countries in the region, including Hong Kong and China, Malaysia, Thailand, Taiwan and several more.
One benefit to mutual funds in general is that they are managed professionally, which saves you the trouble of finding solid investments and monitoring the investments daily. Talk to your broker about the many different dividend-paying options that you might want to consider.
About the Author:
Cleveland Jernigan loves blogging about investments. For further info about dividend funds or to discover more about energy mutual funds, visit these fund sites today.
No comments:
Post a Comment