Income Investments Have Lower Volatility

7 Reasons to Invest for Income -- Reason #2

low volatility - man offering tropical drink

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For example, the price of bonds can and do go up and down, but normally only in response to changes in interest rates in the overall economy. These do change over time. But bonds display nowhere near the daily up and down price bounces of stocks.

Low Volatility Isn't Really Important, but Makes People Feel Better

Stocks that pay dividends are less risky than stocks that don't. Companies that pay dividends tend to be bigger, older and more established than those that don't. They've survived for years, so they're less likely to go out of business. They're still growing, but they're already too big to grow dramatically.

Therefore, in a bull market the market prices of dividend-paying stocks don't go up as high or as fast as the small, glamorous, "sexy" growth stocks of small companies with good stories.

However, in a bear market their stock prices also don't go down as far down as the small, now-in-desperate-financial-trouble stocks that need all their cash just to make their payroll.

This means that dividend-paying stocks are less risky than the market as a whole.

Next: Reason #3 -- Perfect for Tax-Deferred Accounts

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