I’m going to take a break from the stock discussion and take
a broader view of financial goals in general.
The overall goal is to become financially self-sufficient, meaning in short
to become YOUR OWN BANK. The current
financial climate has underscored the fact that in order to have financial
freedom you need to have cash on hand.
Instead of depending on banks to lend credit we need to be able to personally
finance whatever goals we are setting whether they are buying a car, home
repair, schooling, etc.
Trading stocks is just a tool to help you get to your
broader goal of financial freedom. By
putting your money into equities that are increasing in value you are getting a
higher rate of return on your money as opposed to just letting it sit under a
mattress.
With that goal in mind it makes a lot of sense to buy stocks
that pay a dividend because they are making money for you while you sleep
(passive income). The only reason to buy
non-dividend paying stocks is to make money on the volatility or stock
movement. That’s why trading options is
a more effective way of making money from stocks that don’t pay a dividend because
of the leverage that options provide. You
make more money off less investment. In short,
if you are not buying the stock for its dividend then it’s better to buy the
option.
I suggest researching stable stocks that pay a high dividend
and buying those so your money is relatively safe and is generating a
profit. Then research stocks that you
think are going to move in medium to large swings and buying options to make
money from the trade. Take that money
and buy more dividend paying stocks to make even more stable income off of your
cash.
