Should You Opt Out Of The Stock Market?

Stocks have taken a dive in the past decade due to a couple of huge recessions

. A little more than twenty years ago, many stock market investors predicted a 30% return rate for their investments. The recessions turned that confidence into panic, as returns are currently set at less than five percent and possibly dwindling to less than two percent in the next decade - so what do you do with your portfolio?

Savings, bonds, and government pension plans are no longer likely to be sources of substantial income for many investors. Interest rates for savings accounts will net you returns near zero percent per year. Although bond funds and corporate funds had a good run, bond returns are getting lower. Finally, Social Security is far from secure as retiree payouts are bigger than what the government earns from payroll tax. Regardless of what you hear, stocks are one of the last viable investments left, although the investor's main question would probably be what to invest in, and how.

It used to be that dividend stocks were hot, but the onset of globalization, technology, and the rise of the stock market changed how people invested. Dividends became old - investors who wanted 30% returns couldn't get them from these types of stocks, so they flocked to fast-growing ones as well as those with high growth potential. As a result, dividend paying stocks fell out of favor and started trading at a discount.

Today, things have come full circle - dividend stocks are once again becoming a good investment opportunity, as they tend to outperform many other kinds of stocks. You can identify good dividend opportunities by finding stocks that yield big, have feasible payout ratios, and display the ability to increase dividends over time. Find stocks that trade dirt-cheap, and you'll ensure value.

by: Carina Smith

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