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Dividend Investing and value investing are two different strategies to make money from the stock market. Each has its own benefits, but which is the better strategy?
Well let us take a quick look at how they differ.

When you are income investing you are simply going out and finding a list of dividend paying stocks then start buying the ones which pay the most. The main advantage of this strategy is that you are going to get a monthly cash flow from the stock for a relatively small amount of work.

If you can find a stock that is paying you money, why not invest in it and reap the rewards. However the major disadvantage to income investing is that it does not guarantee that you will make money, as if anything actually does.

Just because a stock is paying out a high dividend does not mean it will be a good investment. If it drops to $0 in the next few months it really doesn’t matter how much they were paying you because they don’t exist anymore.

So you are risking getting into a stock which will completely destroy your account.

Value investing on the other hand is different. This takes into consideration a large number of factors in order to be able to determine the companies overall strength.

One of the main indicators which value investors will look at is the P/E ratio. So, What is the PE Ratio? This ratio simply tells the individual investor how expensive the stock is when compared to the company’s earnings.

So if the stock is trading at $40 and its earnings per share was $2 then its PE would be 20. This number could be compared to other companies in the industry in order to pick the best investments out there. Usually the lower the PE ratio the cheaper the stock and the better investment it is.

This this is just 1 example of a method you can use to determine the strength of the overall company. Many investors will actually combine it with other methods to help you increase their chances of getting into a good stock.
Looking at the company’s fundamentals can take a lot of research, but it can be worth the time in the long term.

So, which strategy is better income investing or value investing? Maybe the real question is why do you have to choose? Combing income investing and value investing can let you get into companies which you believe will be around for a long while with companies that are paying out a health dividend.

You may decide to put more enfaces on one strategy over another, but by combining the two you can benefit in two different ways, both by the dividends and hopefully by appreciation.

Another benefit you get when you combine the two strategies is that you lessen the chance that you are getting into a stock that is not strong and is and will just go bankrupt after you buy it.

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