Food for Thought

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.