After my relentless efforts, it took me 3 months to finally save a small sum of money, and then the question arose: where should I put this money?

Upon opening my account, I fell silent: the yield on money market funds seemed rather meager; bank wealth management, it felt like the returns were a matter of luck, bouncing back and forth between money market and bond funds; stocks, funds... Last year, if I hadn't worked so hard, I might not have lost so much now, um, well, there are still positive returns:

Firstly, the gold ETF, with a return rate exceeding 10%, but now that gold prices are constantly setting new highs, holding is fine, but I don't have enough conviction to add more to my position;

Secondly, a Japan equity selection theme fund, with a return rate of 5%, but they just announced an interest rate hike in March, so I'll wait and see;

Thirdly, a dividend low-volatility fund, into which I've been making regular investments, and the total return rate is now 20%;

Fourthly, stocks in Gree Electric Appliances and China Merchants Bank, which fluctuate between red and green, and have just recently turned red.

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After a careful review and consideration, I found that the most suitable for me to add to my portfolio at present is: high dividend stocks, also known as dividend-paying stocks, some people also call them retirement stocks.

Why choose dividend-paying stocks? Because they have low valuations and high dividends. Low valuations mean that there is limited downside potential in the stock price, and high dividends indicate good operating conditions.

The market is quite volatile at this stage, with big ups and downs not requiring much reason. As an ordinary investor, I want to adopt a relatively defensive investment strategy at this stage, not seeking big gains, but aiming for resilience against losses.During a bull market, growth stocks are promising for the future, with the metaphorical "cake" being both large and round. In a bear market, when digestion is poor, there is a preference for stocks with small fluctuations and high resistance to falls, as well as those with high dividends.

Previously, I had a misconception about dividend-paying stocks, thinking that so-called dividends were merely a matter of transferring money from one hand to the other, with no real significance. It was only in recent years, when I observed some financial bloggers sharing their investment strategies, that I realized my perspective was too narrow: public companies pay dividends annually, and although the stock price is adjusted for the dividend, it does not go to zero. The cash dividends are money earned by the company, and the dividends distributed are also newly created wealth; they are tangible and real money.

How can we determine the level of dividends for a stock? There are two commonly used indicators:

First, the dividend yield. Dividend yield = Dividends / Price per share. For investors, the higher the dividend yield, the more dividends they receive.

Second, the payout ratio. Payout ratio = Cash dividends / Net profit. Generally speaking, the higher the payout ratio, the more of the company's earnings are given to shareholders. There is no mandatory regulation on how listed companies in our A-shares market should distribute their earnings, but the China Securities Regulatory Commission encourages companies to actively pay dividends and advocates a payout ratio of no less than 30%. In other words, a 30% payout ratio can be considered the passing mark.

Individual stock dividends and dividend yields can be directly checked on the stock's detail page. If you want to conduct more data screening, dividend yields can be found on the Jisi Lu website, and payout ratios can be found on the Lixingren website. My personal data extraction and analysis skills are quite average, so I take the lazy man's path by following several financial bloggers, reviewing their actual investment records, comparing the lists they have screened, and ultimately determining my own investment targets.

In addition to data screening, there is a core element for dividend-paying stocks: the stability of dividends.

Cyclical stocks may pay high dividends one year but do not guarantee continued dividends. For example, in the coal industry, during the energy crisis a few years ago, coal prices soared, but this year, with the decline in coal prices, even the income of industry workers has begun to fall, leaving little room for imagination regarding dividends.

High leverage dividend traps occur when companies use high debt to support high profits and high dividends, which can easily be impacted by industry downturns and other negative events, such as the real estate sector in recent years. Once, the dividend yield of Evergrande's real estate stocks was close to 20%, but now investors are left with only a mess.

Some companies make large dividend payments, which can also be a way of transferring benefits to shareholders. Large dividends allow major shareholders to cash out in a concentrated manner.Therefore, investing in dividend-paying stocks must be rational, as it may face:

First, the risk of stock price decline. As soon as you purchase stocks, you are inevitably exposed to the risk of price fluctuations. The stocks I bought, China Merchants and Gree, have always been alternating between gains and losses, with Gree's maximum loss reaching 20%. One of my colleagues bought China Merchants Bank at a high point and couldn't bear the loss, eventually having to sell at a loss and exit. Therefore, it is crucial to buy at an appropriate price; otherwise, the loss of principal may far exceed the dividends you receive.

Second, dividends can fluctuate. The amount of dividends is objectively related to the company's business operations and subjectively related to the company's willingness to distribute dividends to shareholders. The past can only represent the past and cannot represent the future.

Once anomalies occur, we must promptly adjust our investment plans. If you feel confused and overwhelmed, and do not have enough time to manage it, you might consider dividend strategy index funds. These are funds that specifically invest in high-dividend stocks, originating from the United States. According to historical data, they often outperform the market. The principle is not complicated: high-dividend companies to some extent reflect the company's ability to earn money. Buying stocks of high-dividend companies is equivalent to buying a batch of companies with profitability above the average level, and the long-term returns are also expected to exceed the average level.

Currently, the common dividend strategy indices in China mainly include six: Shanghai Dividend, Shenzhen Dividend, CSI Dividend, S&P Dividend, Dividend Low Volatility, and Dividend Low Volatility 100. The investment targets vary, so everyone can choose according to their needs.

It should be noted that, from the data, dividend funds can outperform the market in the long term, but this does not mean they can outperform the market every year. For example, in 2019 and 2020, the returns of dividend funds were not as good as the CSI 300.

The advantage of dividend funds is their strong defensiveness, while the disadvantage is their lack of offensiveness. Once the economy improves and the market soars, high-dividend stocks often lag behind growth stocks. Conversely, in a relatively weak market environment, a high-dividend strategy can yield better results.

No investment strategy is perfect; it is just the most suitable for our current state at this moment. When investing in dividend-paying stocks, one must pay attention to external changes, such as stock price fluctuations and reductions in cash dividends, as well as internal changes. When the overall economic environment is not good, our salary income may stagnate, and daily living expenses may increase, which will affect our investment decisions. After determining the investment targets, we must formulate a flexible operation plan based on our own situation, which can ensure both the balance of life and investment and the achievement of our investment goals.