If I Could Go Back, I’d Start Investing in Dividends at 20 – Here’s Why Timing Matters

At what age would you buy dividend stocks if you could go back in time? The Dividends subreddit was bustling after one investor asked if people regretted buying dividend stocks too early or too late in their journey.

For instance, some people may regret buying dividend stocks in their 20s because they saw growth stocks outperform them for more than a decade. On the other hand, other investors may wish they got into dividend stocks in their 40s instead of waiting for their 60s due to market volatility and steep losses from unprofitable investments.

Dividend investors shared their thoughts and some advice for people who are considering dividend stocks. 

Buy Stocks For The Long Run

One of the top comments came from a Walmart (NYSE:WMT) investor who bought shares at $6 apiece and held on to them. The investor now has 1,110 shares and receives an annual dividend that is close to 16% of the initial investment. 

That’s the advantage of buying dividend growth stocks. These corporations pay dividends but still have plenty of growth prospects left. Even at its current level of success, Walmart still has growth opportunities. Online advertising, e-commerce, and retail locations are some of the company’s growth levers. 

Buying dividend stocks doesn’t mean you have to be stuck with mature, high-yield companies. For instance, Broadcom (NASDAQ:AVGO) has a dividend yield above 1% and has crushed the stock market with a 685% gain over the past five years. 

Why Wait To Invest?

Multiple dividend investors asked why people would wait to invest. Some people said they wished they could invest when they were born, while others wished they invested in their early 20s. People weren’t expressing regret about entering stocks in their 20s and 30s. 

Waiting to invest doesn’t make much sense if you want to become wealthy. The longer you let your money sit in the stock market, the more time you have to compound your returns. Waiting to invest causes your money to lose value due to inflation. A high-yield savings account is better than nothing, but it can’t appreciate like dividend stocks. You only get the cash flow from a bank account, while dividend stocks can double in value over the course of 5-10 years.

Transition To High-Yield Dividend Stocks When You Need Steady Income

A few dividend investors said that it makes sense to diversify into high-yield stocks when they need additional income. Many investors focused on dividend growth stocks or index funds that tracked major indices like the S&P 500 when they were younger. Then, they gradually sold off some of those holdings and shifted into funds with lower risk and higher yields.

Every person has a different financial situation and long-term goals. If you don’t need to sell your assets within the next decade and don’t need dividend income, it may make more sense to focus on growth-oriented opportunities.  

However, your plans may look different if you want to sell your stocks in 1-3 years to buy a house. Then, it may be better to take a cautious approach and focus on funds that have high yields and steady growth instead of riskier funds that aim to produce 10%+ annualized returns.

If you’re just getting started, you can diversify your portfolio with dividend stocks and growth-oriented stocks. Reinvesting dividends ensures that your dividend income grows over time and can eventually cover your living expenses. Monitoring dividend stocks can help you build a robust portfolio that aligns with your risk tolerance. 

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