Here's One Seamless Way to Pump Extra Money Into Your Brokerage Account Every Year


The nice thing about saving money for retirement in a 401(k) is that many employers offer matching contributions to these accounts. So if you have a dollar-for-dollar match for up to $3,000 a year in contributions, putting in that much from your own paycheck scores you an additional $3,000 from your employer.

It’s not quite as easy to snag extra money in a brokerage account. Sure, some of these accounts have a welcome offer where you’ll get a small deposit made to your account after you sign up. But for the most part, the money you put into your brokerage account is cash you have to transfer from another source, like a linked bank account.

But there is one trick you can employ to get extra money in your brokerage account year after year. It boils down to choosing investments that pay you regularly.

Read more: unlock best-in-class perks with one of these brokerage accounts

It pays to look at dividend stocks

When a company pays dividends, it’s sharing some of its profits with its shareholders. Publicly traded companies are not required to pay dividends. And some of the most well-known ones don’t.

Amazon, for example, is a popular stock. But it doesn’t pay dividends. Instead, it opts to reinvest its profits in the business with the goal of growing its revenue.

But when a company does pay dividends, it’s basically giving you bonus money for being a shareholder. And those dividend payments will generally land in your brokerage account on a quarterly basis. So even if you don’t add money to your account yourself, you could still end up with more cash to invest.

Of course, you don’t have to invest your dividend payments. You could take the money and run. But a good way to grow your wealth is to reinvest that money.

Many brokerage accounts let you arrange for your dividend payments to be reinvested automatically in the companies they came from. You may want to set that up in your account so it happens seamlessly.

Look beyond dividends when choosing investments

Dividends can be a nice source of extra money in your brokerage account. If you collect enough of them, they can even serve as a source of regular income. In fact, many retirees opt to invest in dividend stocks and use those quarterly payments to cover their expenses.

But one thing you don’t want to do is buy shares of a given stock for the dividend alone. Remember, there are two ways to make money in stocks — share price growth and dividends. But a generous dividend doesn’t mean a given company is poised for growth. Some companies might stunt their growth by sharing too much of the wealth with stockholders.

That’s why you should look at the whole picture before buying stocks for the dividends alone. As one example, Pfizer has a pretty generous dividend yield of about 6%. But the stock is also down over 32% over the past five years.

Now, this doesn’t mean you should write off Pfizer. We can’t see the future, and the stock could end up being a moneymaker for people who hold it for the long haul.

The point, however, is that you can’t look at dividends alone when making decisions about which stocks to buy. But if you do find some quality stocks that happen to pay a dividend, you have a chance to open the door to more investing opportunities without having to find the money elsewhere.

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