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The price of gold has risen above $1,900 an ounce after a year of doing very little, but I’m not rushing to buy, preferring to build my wealth in major UK dividend stocks.
I have never liked gold so much. Many investors recommend it as a portfolio diversifier, but I’ve never seen the point. Yeah, I know it’s a store of value and all that. I also know that it doesn’t normally correlate to actions and brings comfort in times of trouble.
Dividend stocks are my bag
However, none of the arguments have convinced me. I bought a bit of gold a couple of years ago, and got bored sitting there, doing nothing. The precious metal has no uses except decoration. Investor demand is based solely on sentiment which, as we saw last year, is impossible to predict. Most importantly from my point of view, gold does not and will never give me any income.
It took me a few years to understand the value of dividend income, but ever since I got the message I have never looked back. I love those cash payments that seep into my wallet, making me richer without having to do anything. They feel much more reliable than random gold price movements, which can randomly go up or down. Once a dividend is paid, it’s mine to keep.
I’m at the stage where I still reinvest all my dividend income to buy more shares. So in addition to getting richer today, I am accumulating wealth for the future. Today, for example, I got £84.56 from the Scottish Eastern Small Business Trust, unexpectedly. Pretty.
Soon the dividends of my recent FTSE 100 stock purchases Lloyds Banking Group, KhakiY red river it will start rolling. I’m looking forward to it. They will go back directly to my portfolio, to increase my participation in those actions. Which will pay me more dividends, in a continuous virtuous circle.
By building a portfolio of mostly FTSE 100 dividend aristocrats, I don’t have to worry if the market crashes from time to time. In a strange way, I will welcome you. It means my reinvested dividends will pick up more shares, at the new lower price. Whereas if the price of gold falls and stagnates, there is no such compensation.
FTSE 100 income shares give me growth too
Dividend stocks offer me more excitement about the shape of capital growth. Persimmon is already up 21.38% since I bought it on October 13. Rio Tinto is up 19.81% since November 8.
Another recent purchase, rolls royce, it’s not a dividend stock right now, but I expect it to restore its payouts to shareholders soon. The stock price has risen 31.01% since my purchase on November 1st.
I bought all three because they seemed undervalued on a number of metrics, including price-earnings ratio. It’s early days, but so far my strategy is paying off. I can’t calculate the real value of gold in the same way, because it doesn’t have any.
Many financial advisors recommend that portfolios invest between 5% and 10% in gold. I don’t have beef with it. I just don’t do it myself.
