Wall Street veteran Alex Green issued warning to Americans who only invest in dividend stocks — here's why he says they are missing out on bigger opportunities

"There are some companies that are growing so rapidly that the best use of their cash is not to pay dividends to shareholders or even to buy back their own shares, but to reinvest in their own operations,” said The Oxford Club’s Chief Investment Strategist Alex Green in a recent interview with finance YouTuber Ari Gutman.

Green recalled a time more than 24 years ago when he worked on Wall Street and advised a client to buy shares in billionaire Warren Buffett’s company, Berkshire Hathaway (NYSE: BRK.A). The client, who was retired, took a pass because they wanted some steady income and the company doesn't pay out dividends. Instead, Berkshire reinvests its profits, and the tactic has been fruitful: Berkshire stock has surged by more than 1,200% since 2000.

How dividends work — and why they sometimes fall short

On the flip side, American States Water (NYSE: AWR) is a “dividend king” in the utilities industry. It increased its dividend for 69 consecutive years, but it has also experienced several years of share price losses.

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Piecing the puzzle together

Green noted that while “there are a lot of great dividend-paying stocks out there”, he would equally “warn people not to invest exclusively in dividend-paying stocks.”

Dividend stocks should be complemented by a mix of other types of investments. These can range from the more conservative and lower return assets like bonds, to those with potentially higher returns but greater risk, such as cryptocurrency.

Cryptocurrencies are inherently volatile – some more than others. But of course there’s a reason the crypto market has remained robust this year: because it can result in sweeping gains. For those interested in the world of digital currencies, Coinbase is the largest U.S. crypto exchange.

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Consider safer alternatives amid market volatility

It can require a lot of legwork to upkeep an investment strategy – especially with more volatile assets that can run up and down the page.

A passive approach to investing can smooth out your responses to the market volatility, because the investing is happening in the background. A study by Fidelity found that inactive accounts (where investors had either forgotten they had an account, or had passed away) had the best returns.

So, toying around with your investments and jumping in and out of the market isn’t always the best strategy. If you’re an investor who wants to invest with ease, Acorns could be right for you.

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Green also urged investors to think of stocks not just in terms of dividends, which many treat as income, but total returns. This is important practice with high-interest accounts too. A high yield savings account typically won’t pay you a dividend, but promises to put your money to work, and earn you a greater return than just keeping your cash in a checking account.

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Diversifying with tangible assets

Another way to diversify your portfolio is by investing in tangible assets.

Gold, in particular, has long been considered a good hedge during periods of economic or geopolitical instability. It won’t pay a dividend, but as Green said, you should consider an investment's total growth opportunity.

For instance, with Thor Metals you can invest in physical precious metals like gold and silver instead of traditional stocks and bonds. Commodities can protect your portfolio and secure against inflation and market fluctuations. On the whole, gold has had a slightly lower rate of return compared to the US stock market, but it's been drastically more stable with fewer swings.