The author, the winner of TheStreet's Stockpicker Walk-On Competition, wrote this piece after he visited with site founder Jim Cramer, who asked how he first got interested in the market and had him write the explanation below.
NEW YORK (MainStreet) After inquiring about the checks my grandfather would receive in the mail, I soon discovered he received "dividends." He explained that some companies will pay their shareholders a monthly or quarterly payment. At 14 years old, I had no idea what he was talking about, but I did know one thing I wanted to receive checks in the mail.
My grandfather knew it was in my best interest to invest in the stock market as opposed to the savings account I had at the moment. While I was incredibly wary of pulling my money out of a safe savings account and into an investment where I could lose money, my grandfather explained the opposite was true. I was earning such low interest in my savings account, that inflation actually caused me to lose money each year in real dollar terms. I thought savings accounts were the one way to NOT lose money!
Now that I was convinced to invest in the market, my grandfather opened an account for me at PNC Bank and used my savings to purchase shares of AllianceBernstein Income Fund (ACG). For several years, I received approximately $20 a month that would get reinvested back into ACG (this way, my monthly check grew as well). As my investment grew, so did my interest in the stock market. I learned to embrace rather than fear the stock market.
I had owned ACG for several years, and I wanted to see what else was out there. So I simply went to Google and typed in "dividend yielding stocks." I clicked on the first result, and I remember being inundated with companies and ticker symbols and percentages. I scrolled through this list until I found a company that I knew, and I soon found AT&T on the list. Even more surprising, AT&T paid a very comparable dividend to what I was already receiving from ACG. AT&T is a company I understood, and it also offered real opportunity for my principal to grow, unlike with ACG.