Jim Cramer may be the most influential person in the stock market today. He is the host of Mad Money on CNBC and is known to make contraversial statements and has a frenetic on camera persona complete with sound effects and the viewers wondering if this guy is sane.
Cramer has been making a big push for investors to buy stocks based on their dividend yield for weeks now. Is this good advice? It depends.
If wealth preservation and safety fit your investment profile Cramer's advice makes a lot of sense. The reasoning is that at least you are earning some money off the dividends. As stock prices have gone done, some of the dividend yields have become pretty attractive in today's uncertain market.
If you are a young investor this may be a viable strategy but you may also be costing yourself capital appreciation. In general, dividend yielding stocks tend to be more stable in price. Investors make their money off of the yield rather than the appreciation of the stock. Therefore, you may get a safer investment in exchange for a lower rate of return.
As always, you should talk with your advisor before you simply follow the advice of Cramer.
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