Suze Orman Says Your Brokerage Account Could Be an Income Source if You Do This

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  • Investing in a brokerage account could help you grow your money.
  • One type of investment could end up paying you regularly.

It's a move you might really appreciate.

These days, a lot of people are seeing losses in their brokerage accounts. Even though the stock market rallied a bit at the end of July, most major market indexes are still down substantially for the year to date.

But on a recent podcast, financial guru Suze Orman said that long-term investors shouldn't panic over recent market events. Not only that, but she insists that if you're heavily invested in dividend stocks, you can worry even less about the ongoing market downturn, because you're still making money in your portfolio. And that's a point worth taking to heart.

The upside of dividend stocks

When a company pays dividends, it means it's choosing to share a portion of its profits with its shareholders instead of simply pumping all of that money back into the business. Importantly, there's no such thing as a preset dividend -- companies can decide how much of a dividend they want to start out paying, and they can opt to increase or decrease their dividends through the years.

In fact, it's possible for a company to start out paying dividends and then stop that practice entirely. Unlike bonds, which are required to pay interest to bondholders, companies that issue stock do not have an official obligation to pay dividends to shareholders.

But many companies do have a lengthy history of paying dividends. And so if you like the idea of having your portfolio serve as an ongoing income source, then it could pay to load up on dividend stocks.

What can dividends do for you?

There are several benefits to collecting dividend payments. First, if you don't need those payments to cover your bills, you can reinvest them, so your portfolio grows even more. But if you do have a need for cash, you can simply collect your dividends and use that money for any purpose, whether it's paying your mortgage or putting food on the table.

In fact, Orman insists that investors with lots of dividend stocks may not be in such bad shape right now. Sure, their portfolios may be down compared to where they were at the start of the year. But investors who specifically set up their portfolios to generate income should at least have access to those dividend payments, despite the market downturn.

In fact, to some degree, loading up on dividend stocks could protect you from taking losses in your portfolio. Say a need for money arises and your savings account is empty. If you go to sell some stocks in your brokerage account and all of your investments are down, you could end up losing money. But if you have several hundred dollars in dividend payments sitting in your account, that could be enough to satisfy your need for cash and help you avoid taking losses or racking up debt.

Now, this isn't to say your investing strategy should center solely on dividend stocks. But if you like the idea of generating ongoing income in your brokerage account, then it pays to at least dig deeper and see if there are any dividend-paying stocks that are a good fit for you.

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