Roth – Dividend vs High Growth Stocks
June 25, 2015 at 2:17 pm #134882AlaynaParticipant
I will be updating my ROTH and would like to find out the best types of stock to buy. There have been two suggestions: 1) Buy high dividend stocks or 2) Buy Stocks with more growth (risk) potential. The first makes sense, but the second was suggested with the idea that you could trade stocks more easily and more often in the ROTH since there wouldn’t be capital gain issues. It seems like the second suggestion would take more management and I’m wondering if it would be worth it in the long run?
Thanks for your thoughts!June 25, 2015 at 5:53 pm #134947CynicFan0329Participant
Like gambling at Vegas. You simply make your choice, place your bet and realize that the House wins 53% of the time.June 25, 2015 at 7:34 pm #134968Dan SchointuchKeymaster
If you want to mange your portfolio yourself, you might want to look into setting up a “lazy portfolio”, like one of the three fund lazy portfolios found here: http://www.bogleheads.org/wiki/Lazy_portfolios
The basic premise is that, instead of trying to beat the market by picking individual investments and most likely not succeeding over the long term, you invest in the entire market while paying as little in fees as possible.
(Even seemingly small fees can add up to significant amounts of money over your lifetime. If you invest $300 a month for 45 years and earn 8% interest, you’ll have saved $1.61 million. But, if you have to pay an extra 0.5% in fees on those same investments, effectively earning 7.5% interest, you’ll only have saved $1.36 million. In other words, paying just 0.5% in fees would reduce the money you’d have saved for retirement by $250,000.)
But you should also take a look at target date retirement funds from Vanguard and Fidelity. The funds essentially follow the strategy of a lazy portfolio, and start off aggressively when you’re young then gradually become more conservative as you grow older by automatically changing the ratio of stocks to bonds.June 27, 2015 at 5:01 pm #135215LanceParticipant
Dividend stocks are always good, at least they provide some money even if the stock price goes sideways or drops.
Most stocks are pretty expensive right now so going with non-dividend stocks isn’t a great idea unless you can find something that is cheap with great potential.
A market correction is coming just not sure when 6-18 months likely. Just keep that in mind as you invest. Find strong Blue Chip stocks with a long history of rising dividends.
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