Recently, I've seen many young people discussing whether investing in stocks can help achieve early retirement. To be honest, this topic has been somewhat sanctified. Stock investing is indeed a good method, but it’s definitely not that magical.

First, let’s talk about what stock investing actually is. Simply put, it’s buying a stock and holding it long-term, relying on the company's dividends to accumulate returns. It sounds a bit like putting money into a savings account, which is why it’s called stock investing. This approach is quite popular in Taiwan, and online there are many inspiring stories of “earning xxx thousand a month and retiring comfortably.” But I have to be honest, these stories often only show the glamorous side of stock investing.

Let me first discuss the pitfalls of stock investing. The biggest problem is—stock investing doesn’t guarantee capital preservation. Many people earn dividends, but their principal gets eaten up by stock price declines. A classic example from 2021 is very illustrative: that year, a stock paid a dividend of 10 yuan, with a yield over 15%. Many stock investors rushed in, but the stock price plummeted from 70 yuan down to 22 yuan. In the end, the dividends were offset by the capital loss, which is called “earning dividends but losing on the price difference.” So, stock selection really matters; it’s not just about high dividends.

Second, stock investing tests your stock-picking skills. Besides yield, you need to consider industry prosperity, company development, valuation, and other fundamental factors. If you pick the wrong target, long-term holding is pointless. Another often overlooked point is that the funds used for stock investing are basically locked in. If you need to sell in a hurry, you might have to do so at a low point, missing out on dividends and incurring losses. Therefore, stock investing is best suited for idle funds that won’t be needed in the short term.

Additionally, short-term returns are indeed limited. Stock investing relies on time and compound interest. Market volatility has a big impact in the short term, so expecting to make quick money from stock investing is basically unrealistic.

After discussing the disadvantages, let’s look at the advantages of stock investing. The most direct appeal is passive income. As long as you hold solid companies long-term, you can regularly receive cash dividends or stock dividends. If you reinvest the dividends, combined with the power of compound interest over time, after 20 or 30 years, the number of shares will grow like a snowball, and the total return can be quite substantial.

Moreover, stock investing doesn’t require daily market monitoring, making it especially suitable for working professionals. Because it’s focused on the long term, as long as the company’s fundamentals don’t deteriorate, you can hold through market fluctuations, even viewing dips as opportunities to buy at a discount. This mindset is much more stable than short-term trading.

From an inflation resistance perspective, well-performing companies’ profitability usually adjusts with rising prices. Stocks in raw materials, finance, and essential consumer goods tend to have long-term upward trends in both stock prices and dividends, providing a natural hedge against inflation. There are also tax advantages: in Taiwan, dividend income can be combined with comprehensive income tax and enjoy an 8.5% tax credit, which is beneficial for low-income groups.

So, what stocks should you choose for stock investing? The focus isn’t just on high or low dividends but also on payout sustainability and long-term growth potential. Taiwanese stock investors often choose ETFs like Yuanta High Dividend (0056), Yuanta Taiwan 50 (0050), or Cathay Sustainable High Dividend (00878), which offer diversification and are suitable for beginners. Alternatively, financial stocks like Mega Financial, CTBC Financial, or E.SUN Financial are popular choices due to stable dividends and solid fundamentals. Telecom stocks like Chunghwa Telecom are also reliable—no matter how bad the economy gets, everyone still needs telecom services, and their stock prices tend to be very stable.

What kind of people are suitable for stock investing? If you can set aside some idle funds periodically, don’t pursue short-term high profits, have enough patience to endure market fluctuations, have a conservative investment style, and are confident in your fundamental analysis of companies, then stock investing can be a viable option.

Finally, I want to say that stock investing is not a guaranteed path to wealth for young people. If you want to get rich, you can’t rely solely on stock investing. Especially for young people with limited idle funds, turning around just by stock investing is not very realistic. Diversification is the basic skill for entry, and choosing the right investment method according to your financial situation is equally important. Remember, all investments carry risks—never follow the crowd blindly.