Knowing the Difference between Dividends and Interest…….

It is very important that the self directed investor understands the difference between dividends and interest.

-Dividends- Dividends are generally paid to shareholders of a publicly traded company.

-Interest- Earning interest would be from loaning your money. If you put your money in the bank or buy bonds you are actually loaning your money.

The single most important reason for knowing the difference is tax. Dividends are taxed at a different rate than interest earned. It is suggested to seek professional accounting advice on how these tax rates affect you.