Investing Basics

Dividend growth investing (DGI) is one of many common investment strategies in the stock market. DGI is a common form of income investing that focuses on first growing a dividend income stream and allowing the market value to follow. While not ignored, a dividend investor's primary focus is on cash flow rather than the stock's price appreciation.

The dividend payout ratio is a financial metric indicating the percentage of cash paid out to a company's shareholders. It is a valuable financial metric to consider while evaluating how the company operates and whether it has any growth potential.

Portfolio diversification is a form of portfolio risk management. By not "placing all your eggs in one basket," you minimize the potential for loss due to unanticipated risks associated with any single investment. The old proverb warns us not to depend entirely on one particular thing and that we should diversify our resources and efforts across multiple baskets instead.

Capital gains or losses are considered a taxable event when you sell anything the IRS deems a capital asset. A capital gain occurs when the asset sells for more than your initial investment, and a capital loss occurs when the assets it sold for less than the initial investment. Whether you should hold onto an investment for a short or long duration for tax purposes depends on your personal situation, investment goals, and potential return. Tax-loss harvesting is a strategy that can potentially lower your taxes from investing.

An investment portfolio is a collection of stocks, indexes, exchange-traded funds (ETFs), bonds, commodities, cash, and cash equivalents and may include other alternative assets owned by an investor. When asked, people generally assume a portfolio is some variation of stocks, bonds, and cash. While this is often the case, a portfolio can also include alternative assets like real estate, art, and private investments.

Investment and Portfolio Management is a vital process that helps align an investor's portfolio to match their time horizon, investment goals, and risk tolerance. Whether you've decided to hire an investment advisor or manage your portfolio yourself, develop a habit of monitoring and reviewing your current investments to ensure they align with your goals.