Many young people have been discussing whether saving stocks can achieve financial freedom or even early retirement in recent years. Honestly, I’ve thought about this topic quite a few times myself. Saving stocks like money, slowly accumulating through company dividends, sounds very attractive—no need to watch the market every day, and you can have passive income. But is it really that simple?

First, let’s clarify that the essence of saving stocks is to buy stocks and hold them long-term, then earn money through the dividends paid by the company. It’s somewhat similar to a fixed deposit bank earning interest, which is why it’s called “saving stocks.” It has become especially popular in Taiwan in recent years, with various stories online about “earning several thousand dollars a month from saving stocks, a stable way to retire comfortably.” But I have to be honest with you: not all stocks are suitable for long-term holding, and relying solely on dividends to make money is much more complicated than it seems.

Let’s talk about the most overlooked risks of saving stocks. In 2021, a stock that paid out a dividend of 10 yuan, with a yield over 15%, was very popular and attracted many investors. But what happened afterward? The stock price plummeted from 70 yuan down to 22 yuan. Do the math—you earned dividends, but they couldn’t offset the capital loss. This is the most common pitfall for saving stock investors—earning dividends but losing the principal. So, saving stocks is definitely not a guaranteed profit; choosing the right target and entry point is really crucial.

Another easily underestimated issue is the difficulty of stock selection. You can’t just look at high dividends; you also need to evaluate the company’s ability to fill the dividend, industry prosperity, company fundamentals, and valuation. This tests your analytical skills. Plus, the funds used for saving stocks are basically not flexible—they can’t be used at will, because if you suddenly need cash, you might be forced to sell at a low point. Therefore, saving stocks are best suited for idle funds that are not needed in the short term.

And one more thing: the short-term returns from saving stocks are indeed limited. Market volatility and emotions can greatly influence stock prices in the short term. If you want to make quick money, the profit space for saving stocks will be greatly compressed. But on the other hand, saving stocks do have many advantages.

The most direct appeal is the power of compound interest. As long as you hold good-quality companies long-term, you can receive fixed cash dividends over time. If you reinvest the dividends, combined with the power of compound interest over 20 or 30 years, the number of shares will grow like a rolling snowball. Many people don’t realize that the seemingly modest annualized return, accumulated over such a long period, can result in a very substantial total return.

Another advantage of saving stocks is that it’s low-maintenance. No need to watch the market frequently, and no need to guess whether the stock price will go up or down tomorrow. It’s especially friendly for working professionals who don’t have time for in-depth stock research. Because it focuses on long-term trends, as long as the company’s fundamentals don’t deteriorate, even market turbulence won’t shake the confidence of saving stock investors as much as short-term traders.

Long-term holding can also combat inflation. Cash will depreciate due to inflation, but good-quality companies are different—they usually adjust their profits in line with rising prices. Stocks in raw materials, financials, and essential consumer goods tend to have upward long-term trends in both stock prices and dividends, providing an anti-inflation effect.

In Taiwan, saving stocks also have a relative tax advantage. Dividend income can be combined with comprehensive income tax and enjoy an 8.5% tax credit, or be taxed separately at 28%. For most saving stock investors, especially those with lower income tax rates, this often results in tax refunds or lower tax burdens. However, be aware that if a single dividend exceeds 20k yuan, a 2.11% supplemental health insurance fee for second-generation health insurance will be deducted.

Regarding stock selection, the prerequisite for saving stocks to play to their strengths is choosing the right targets. In Taiwan, the popular saving stock categories roughly fall into three types. The first is market-cap and high-dividend ETFs, such as Yuanta High Dividend (0056), Yuanta Taiwan 50 (0050), Cathay Sustainable High Dividend (00878), etc. ETFs invest in a basket of stocks, offering good diversification and risk reduction, especially suitable for beginners. Although their dividend yields aren’t the highest, the long-term returns from capital appreciation are often more impressive.

The second category is financial stocks. Mega Financial, CTBC Financial, E.SUN Financial—these are favored by saving stock investors because of stable dividends and relatively solid fundamentals. But “not going bankrupt” doesn’t mean their stock prices will always go up; timing the entry still matters. The third category is telecom stocks, like Chunghwa Telecom, which remain very stable because everyone needs to make calls and surf the internet, even in tough economic times.

So, are you suitable for saving stocks? If your single investment amount isn’t large but you have a long-term investment mindset, and you can periodically set aside idle funds for investment, saving stocks is worth considering. The key is to use idle funds, because saving stocks require a longer holding period to see returns. If your funds are needed in the short term, it’s less suitable.

Saving stocks also require patience—being able to endure market fluctuations and short-term price swings without being swayed by market sentiment. If your investment style is conservative, with low risk tolerance, and you focus more on long-term appreciation and dividend income, saving stocks can be a good choice. It’s also best if you have confidence in your company analysis skills, able to evaluate performance, competitive advantages, and long-term growth potential.

Ultimately, saving stocks are not a guaranteed path to wealth for young people, nor the only way. To get rich, you can’t rely solely on saving stocks, especially since young investors usually have limited idle capital. Relying only on saving stocks to turn things around isn’t very realistic. The real wisdom lies in diversifying investments and choosing the right investment methods based on your financial situation. All investments carry risks—never follow the crowd blindly, and always have your own judgment.