We are approaching the cutoff to contribute under FY14 and I am thinking about shaking things up a little bit; I appreciate your feedback. Currently I have my full ROTH under BlackRock funds (LifePath and other investment funds), I am considering investing at least a portion of my FY14 contribution towards dividend yielding stocks such as GE. How many of you have dividend yielding stocks as part of your IRA (Traditional and/or ROTH)? I prefer to purchase historically stable stocks that yield dividends over stocks that may or may not result in a positive return (I can do this on the side). Are there any reasons why I should stick solely with prearranged investment funds?
Question for Banker and others who control their IRA
- Thread starter herdfan06
- Start date
I have never understood this obsession many have with dividend stocks. A dividend doesn't guarantee a return by any stretch of the imagination. In fact dividend yielding companies are usually huge companies with no room for growth.
Vanguard total stock index has averaged about 12% over the past 5 years. GE has averaged about 6%. GE only returned 6% in one of the best bull markets we have had.
As far as safety goes, I would argue that the index fund is safer.
Vanguard total stock index has averaged about 12% over the past 5 years. GE has averaged about 6%. GE only returned 6% in one of the best bull markets we have had.
As far as safety goes, I would argue that the index fund is safer.
You could have best of both worlds by finding an ETF/Mutual fund that invests in dividend paying stocks. You get the diversity for safety and the dividend that allows you to sort of dollar cost average by reinvesting at each dividend point.
If it were in a non-retirement acct, the indy stock can be tax advantaged if held for over a year as your dividends become qualified and taxed at a lower rate....but you are also taking on a lot more concentration/non diversity risk if that company runs into trouble.
If it were in a non-retirement acct, the indy stock can be tax advantaged if held for over a year as your dividends become qualified and taxed at a lower rate....but you are also taking on a lot more concentration/non diversity risk if that company runs into trouble.
Agree. I use Vanguard index funds (in combo with bonds) for all my IRA/401k. Not a big fan of individual stocks or actively managed mutual funds - neither is Warren Buffet.
I would simply point to Warren Buffet as a counter to your opinion.
Looking at anything within the context of "the last 5 years" is enough to distort many comparative returns. Although GE may appear to be a boring stock or has returns (growth) that "under perform" a broader index, owning an individual stock (like a GE) that pays you to own them (dividends) is a solid way to build wealth (reinvesting the dividends) over time (longer than 5 years) with limited volatility if that is what is needed in a portfolio.
Making the assumption that another investor should only look for "growth" stocks when having no idea the makeup of their total portfolio or having a complete understanding of their entire financial strategy/plan is naïve.
Warren made billions while investing in individual stocks. Agree fully with managed mutual funds as a complete waste.
If GE goes out of business, you better have can goods and plenty of ammo. The world is ending.
Buffet is such a huge fan of dividends that he has never paid out a single dividend in Berkshire Hathaway's existence.
GE lost 80% of its value in 2007. VTI only lost 50% of its value. Limited volatility with GE is simply not true. You are going to have a more stable performance by a broad fund.
The OP's statement of wanting to buy dividend stocks because other stocks may not have a positive return is simply not true. If GE's intrinsic value doesn't change during a calendar year and they pay out a dividend of 3%, GE's stock value goes down by 3 %. You made no money. You can do the same thing with VTI and just pay yourself a dividend of 3% every year by selling stock if for some unknown reason you seek that.
Not to mention dividends are terrible for tax purposes.
If a steady return is what you seek, go buy Bonds. Their returns are very similar to GE's dividend and market fluctuations will be completely eliminated if that is what you seek.
Yet Buffet buys stocks which pay dividends.....CONTINUALLY. Whether he pays one through BRK has nothing to do with this conversation. Do you ever stay within the context of the discussion being had?
You offer a lot of hypotheticals....IF GE goes down 3%, pay yourself a dividend by selling stock, unchanging intrinsic values......
Again. Try and focus Penn. Most people are not going to be trading in and out of IRA purchases. Especially if buying a stock like GE. Selling stock to "pay yourself" isn't typically a strategy one will be doing in an IRA. Furthermore, dividends earned within an IRA are tax deferred. There is no effect on your taxes. Dividends being "terrible for tax purposes" is also relative. Collecting dividends in order to buy more shares is always an acceptable practice in a company that isn't going anywhere.
Suggesting to someone that buying bonds will "eliminate fluctuation" is also absurd. (Even more so as we approach potential interest rate changes by the Fed in the coming months).
Let me say this... For a regular guy like me (ie not someone with all day to investigate the financials of a company) it just makes too much sense to use index funds.
Buffett and his index fund are killing the guys who get paid to pick stocks (I'm on mobile - google about the $1 million challenge - hedge fund vs index). How can I expect myself to pick stocks with a success rate higher than a low fee index fund?
This post was edited on 4/7 7:57 PM by -CarlHungus-
Buffett and his index fund are killing the guys who get paid to pick stocks (I'm on mobile - google about the $1 million challenge - hedge fund vs index). How can I expect myself to pick stocks with a success rate higher than a low fee index fund?
This post was edited on 4/7 7:57 PM by -CarlHungus-
I tried using examples to illustrate points. Which I apparently failed at.
You do realize that when a company pays a dividend that the stock value of that company decreases by the amount they paid out? You keep talking about reinvesting dividends. If a company pays you a 1% dividend and you reinvest that 1%, you went nowhere. It would be the same as the company not paying the dividend at all.
If I go buy a 30 year bond for $1000 that pays 3% a year, I will get exactly $30 a year for the next 30 years. There is absolutely no fluctuation.
You do realize that when a company pays a dividend that the stock value of that company decreases by the amount they paid out? You keep talking about reinvesting dividends. If a company pays you a 1% dividend and you reinvest that 1%, you went nowhere. It would be the same as the company not paying the dividend at all.
If I go buy a 30 year bond for $1000 that pays 3% a year, I will get exactly $30 a year for the next 30 years. There is absolutely no fluctuation.
Yes you continue to fail miserably because you are wrong on both these points too.
A stock does NOT go down because a regularly scheduled quarterly dividend is paid out. In the case of a "special-one time" dividend (a bonus dividend) you indeed see a decrease in the share price. These do not occur on a regular basis and usually only occur when a company is loaded with cash and is performing strongly. In my experience its a gift on two counts. You get the bonus payout combined with the higher likelihood the stock will go higher from the price readjustment. It may offer the investor a good chance to accumulate (grow) their portfolio value by buying more on that dip. Regular qtrly dividend payouts have no effect on share price.
Second, if you actually believe nothing will or can happen to the value of a $1000 investment in a 30 yr bond, then I will be happy to sell you the turnpike I own in WV. Bonds inherently have interest rate risk and duration risk associated with their purchase. I would suggest you educate yourself a little more on bond investing before making such uneducated statements.
Revisiting one of your original "examples" (GE down 80% vs. Van Index Fund down 50%)...food for educated thought.
A $10k purchase of GE stock (~2009) would now be worth ~$33k. A $10k purchase of Van (~2009) would now be worth ~$22k. I didn't even take the time to calculate the "dividend reinvestment" analysis, or the returns and appreciation of this GE holding would be even greater.
I have no issue with buying index funds in general. For individuals who choose not to take the time to investigate and research particular businesses or investments this is indeed a better option for investing than choosing the common mutual fund...(which is Buffett's reasoning and strategy with the mass fortune he will leave behind). However, Buffett, and other investors like him (there are many) didn't get wealthy by buying broadly diversified indexes despite their availability for decades. Additionally, hedge funds (in general) "TRADE" positions, diluting potential gains and increasing risks for lower returns. This is NOT what Buffett does/did as a whole. He bought (and still) buys individual stock with the long term view and simple idea that he owns a piece of that individual business which produces cash flow that is returned to him (in the form of dividends) over time in order to reinvest that capital in ways of his choosing.
It's my understanding (please correct me if I'm wrong though), that about 75% of mutual funds under perform against index funds. If the people managing these funds , presumably educate professionals at picking stocks, fail the majority of the time versus index funds ...then it just seems like a bad idea for someone to try to pick stocks.
However, if one feels strongly about a few individual stocks, them I do think it's reasonable to have a small amount of your portfolio (?maybe 10%) allocated to individual stocks you select.
Disclaimer: I know I'm out of my league here with regard to finance/investing knowledge. I have no degree in this stuff and have simply read books on my own and dealt with enough shady "financial advisers" to know a little.
However, if one feels strongly about a few individual stocks, them I do think it's reasonable to have a small amount of your portfolio (?maybe 10%) allocated to individual stocks you select.
Disclaimer: I know I'm out of my league here with regard to finance/investing knowledge. I have no degree in this stuff and have simply read books on my own and dealt with enough shady "financial advisers" to know a little.
I don't know what to tell you other than you are dead wrong on everything you are posting.
The idea that a stock doesn't go do after paying a dividend is just absolutely crazy. In your dream world, I could go buy a stock the week before it pays a dividend and sell it the week after and make a ton of money doing nothing. Furthermore, If a company pays out $2million in a dividend payment, the total assets of that company just went down by $2million. To say that the stock price wouldn't go down shows a complete misunderstanding of the valuation of a company.
Once again, if I hold that bond from start to finish, I will receive my coupon payments at a regular interval assuming the borrower of the money doesn't default. If I go to sell my bond 5 years from now and interest rates are 5%, of course my bond won't be worth $1000 anymore. If you don't sell however, nothing changed. Everything I have stated in this thread about bonds is completely true so quit with the go educate yourself nonsense.
And thank you for proving my point on GE exactly. It is much more volatile than VTI according to the numbers you posted.
Advising someone to try to pick stocks because Buffet did it is like telling a kid he can make it to the NBA because MJ did it.
IMO you need to put the "under performing" and "management" within the correct context when determining this. One needs to ask, are the stocks selected by the professionals within the mutual funds actually "under performing"; is the individual who purchases the mutual fund as an investment "under performing" the overall market simply because of the fees and charges associated with owning such a "managed" asset class diluting the returns (while also failing to receive the benefits of collecting a dividend); or all of above? I think the answer varies depending on which mutual fund you look at and could take days to discuss. Thus the reason for my personal dislike of mutual funds vs. the relative ease at selecting and researching an individual stock without emotional feeling.
As you know, this is the main selling point for index funds. They are not "actively managed", simply stated.......fees, charges, loads, collected by those "managing" are not diluting the returns which contributes to the actual underperformance to those buying them. I have no disagreements with choosing an index fund over mutual funds. But I also know that my strategy picking a diversified basket of individual dividend paying stocks as a core % of my long term portfolio of assets and purchasing more of those specific stocks can be much more effective at building a larger nest egg over time than simply buying an index fund (which just so happens to make Jack Bogle another $billion
Editorial note: The financial industry has made $Trillions telling individuals that they "cant" invest the way Buffett, Bogle, Barron, etc do. Just 1 bad reason for poor investment options offered to the masses like Mutual Funds. Generally I think this idea of "cant" has allowed too many people the excuse to not take an active interest in their financial future (not suggesting this is you by any means Carl). I do agree, not every strategy they (B,B & B) have followed in accumulating their wealth is available to the avg guy. But the core activity of their investment plan and wealth creation (individual stock purchases), can indeed be duplicated with mind boggling success with todays access to information on these public companies. I believe in the end, if one works to mirror what a small successful group of people (like B,B,&B) do regularly, the financial outcomes for making such an effort can far outweigh anything else.
*disclaimer* This is no way constitutes investment advice. I endorse no specific stock or security and all the above are my opinions. Search out your own evil-mischievous advisor in order to come to your own conclusions as to what is best for your investment portfolio.
I don't disagree with much of this.Originally posted by raleighherdfan:
IMO you need to put the "under performing" and "management" within the correct context when determining this. One needs to ask, are the stocks selected by the professionals within the mutual funds actually "under performing"; is the individual who purchases the mutual fund as an investment "under performing" the overall market simply because of the fees and charges associated with owning such a "managed" asset class diluting the returns (while also failing to receive the benefits of collecting a dividend); or all of above? I think the answer varies depending on which mutual fund you look at and could take days to discuss. Thus the reason for my personal dislike of mutual funds vs. the relative ease at selecting and researching an individual stock without emotional feeling.
As you know, this is the main selling point for index funds. They are not "actively managed", simply stated.......fees, charges, loads, collected by those "managing" are not diluting the returns which contributes to the actual underperformance to those buying them. I have no disagreements with choosing an index fund over mutual funds. But I also know that my strategy picking a diversified basket of individual dividend paying stocks as a core % of my long term portfolio of assets and purchasing more of those specific stocks can be much more effective at building a larger nest egg over time than simply buying an index fund (which just so happens to make Jack Bogle another $billion) and waiting for the overall market to appreciate.
Editorial note: The financial industry has made $Trillions telling individuals that they "cant" invest the way Buffett, Bogle, Barron, etc do. Just 1 bad reason for poor investment options offered to the masses like Mutual Funds. Generally I think this idea of "cant" has allowed too many people the excuse to not take an active interest in their financial future (not suggesting this is you by any means Carl). I do agree, not every strategy they (B,B & B) have followed in accumulating their wealth is available to the avg guy. But the core activity of their investment plan and wealth creation (individual stock purchases), can indeed be duplicated with mind boggling success with todays access to information on these public companies. I believe in the end, if one works to mirror what a small successful group of people (like B,B,&B) do regularly, the financial outcomes for making such an effort can far outweigh anything else.
*disclaimer* This is no way constitutes investment advice. I endorse no specific stock or security and all the above are my opinions. Search out your own evil-mischievous advisor in order to come to your own conclusions as to what is best for your investment portfolio.
I'm not doubting your ability to pick individual stocks, but you may have the time or aptitude to do that where as I don't feel comfortable doing that. I just think for people like me (a busy job/medical practice, a family, and no background in business/stock evaluation), index fund investing makes a lot of sense.
Tangentially related (and I think you agree on this), but in my own self study I have been absolutely floored by the shady things that go in to convincing people to buy mutual funds with huge loads or crazy fees.
My ego has nothing to do with this. My experience does.
A regular qtrly dividend (as it relates to the share price of a stock) has limited to no immediate effect on the price it ultimately trades in the market. Especially if the dividend amount is known and not considered excessive by the market. Under your broad assuming scenario, a stock that pays a dividend qtrly would rarely if ever, see appreciation of its shares and would go down endlessly because they simply pay the dividend quarter over quarter because of depleting their assets of cash each time. Your broad assertion that a share price of a stock simply trades on its ASSET VALUE is also myopic and/or naïve. Share prices are most often tied to the perception of the market focusing on the amount of earnings (PROFIT) the company will earn in the future. "I could go buy a stock the week before it pays a dividend and sell it the week after and make a ton of money doing nothing." Add this to the list of stupid hyperbole that adds nothing to the conversation.
Your bond purchase hypothetical only holds true if you buy the bond at its offering and hold it for 30 years or you were able to buy at par during its existence and hold it for its lifetime. Unfortunately, the hypothetical isn't the norm and rarely happens when people decide to buy bonds generally. Most bond investors are buying bonds well beyond their offering and have various values above or below Par levels, which ultimately effects total return of this type of investment. It actually requires a little more thought and planning than simply stating.... " Buy a bond and never sell it"....or...."buy a bond and there wont be fluctuation", as you suggested.
Anyone claiming that GE is a "volatile" stock overall, apparently has only been looking at GE during the last 6 years. Name me a stock or Index that was not volatile in 2008. Name me another time in GE's history it nose dived 80%? Furthermore, based on your "dividend paying= share price always going down theory".... GE should have delisted decades ago with the countless billions its paid out in dividends over the generations. (Thought I might add my own hyperbole to the mix)
I think the "time" component is a huge aspect to anything. As you can attest. Becoming a Doc doesn't happen over night. Neither does the knowledge and practice of investing in the market. I admit. This is a passion of mine. So much so that I went out and passed the series exams a few years back in order to "know" more. (That was painful....and a large waste of fvcking time). Briefly explored the idea of starting a business and doing the broker thing after getting my licenses............Not for me. I was able to meet some very nice and generally honest people in the industry, but at the end of the day, just couldn't do it for various reasons. Especially with having a few years of investing on my own under my belt, it was totally counter intuitive to my own investment practices.
Thank God you didn't become an financial advisor.
Look at GE's stock price since 1998. GE has essentially had no growth at all since 1998. The stock value is the same. The reason is because they give away 3% of the company's value every year.
Look at VTSMX, they are up about 110% since 1998.
Dividends lower the companies value.
Will Banker or someone please chime in and help this fellow?
Look at GE's stock price since 1998. GE has essentially had no growth at all since 1998. The stock value is the same. The reason is because they give away 3% of the company's value every year.
Look at VTSMX, they are up about 110% since 1998.
Dividends lower the companies value.
Will Banker or someone please chime in and help this fellow?
SHHHHHHHHHH. Penn is on a role. I might add a 2 for 1 in 1997......and in.....oh well. We get the point.
There was a good article on Yahoo Finance today about the common characteristics of "emerging millionaires" and how those traits mirror those of deca-millionaires. Tried to find the story but can't locate it on mobile version of the site. One of the seven key traits was that these folks bypass mutual funds and instead are individual stock buyer, and usually stocks that would typically be considered higher risk. They also spend the time to become at least functionally literate in the market.
Here's the bottom line, if you don't have the desire, time or acumen to learn about the stock market you shouldn't manage your own money. Find a broker that you are comfortable with and let them do it. With that said, no matter how much you like or trust them, meet with them at least once a month, review your performance relative to the market, ask questions, because it's still your money.
I'm fortunate in that I am in a profession where I spend my days analyzing the financials of companies across a wide variety of industries. I get to meet with a bunch of CEO and CFO types and hear constant feedback about how things are going on a micro basis within the economy. This information can help me identify sectors for investment and then I can look at several companies within that sector and find one I like. I'm a fundamental investor and focus on three main things, historical results, current state, and known, or likely, future events that specifically impact a particular company and sector. Doing all that takes a lot of time, which is why I'm a buy and hold guy and generally only trade out positions on one or two stocks a year.
Most of the mistakes I have made in the market have come from getting out too early, but as I have said on here before, I always buy with a plan and an exit point. The one I'm kicking myself about right now is Skyworks Solutions, go pull a 5 year chart on it. I had traded it for years because it was a great covered call stock, always really nice premiums on the calls. The company has the best balance sheet of a company you will see, they are in a growth industry, they have proprietary technology and patents. In late 2011 it dropped to $14 and change and I took a large position (for me) and about six months later it was at $27 and I sold out. Since then the stock has been on a tear and is current at $97. Still a great company, I just don't buy the valuation currently. When I sold at $27 my plan was to buy it back when it slide back to about $23, which would be a normal pullback after a nice run. It just never happened. But even with the pullback I almost doubled on 20% of my portfolio in six months. You will never get that kind of return from a fund.
I don't like giving investment advice because my approach and risk tolerance is going to be different than almost everyone else, everybody is unique in that regard. If anyone ever has a question, or interest in a particular company, I'll tell you what I see or let you know if it's in an industry I don't feel qualified to judge. Like my post on RAD a few weeks ago, I might throw out the name of something I like, but that doesn't mean it's for everyone.
Here's the bottom line, if you don't have the desire, time or acumen to learn about the stock market you shouldn't manage your own money. Find a broker that you are comfortable with and let them do it. With that said, no matter how much you like or trust them, meet with them at least once a month, review your performance relative to the market, ask questions, because it's still your money.
I'm fortunate in that I am in a profession where I spend my days analyzing the financials of companies across a wide variety of industries. I get to meet with a bunch of CEO and CFO types and hear constant feedback about how things are going on a micro basis within the economy. This information can help me identify sectors for investment and then I can look at several companies within that sector and find one I like. I'm a fundamental investor and focus on three main things, historical results, current state, and known, or likely, future events that specifically impact a particular company and sector. Doing all that takes a lot of time, which is why I'm a buy and hold guy and generally only trade out positions on one or two stocks a year.
Most of the mistakes I have made in the market have come from getting out too early, but as I have said on here before, I always buy with a plan and an exit point. The one I'm kicking myself about right now is Skyworks Solutions, go pull a 5 year chart on it. I had traded it for years because it was a great covered call stock, always really nice premiums on the calls. The company has the best balance sheet of a company you will see, they are in a growth industry, they have proprietary technology and patents. In late 2011 it dropped to $14 and change and I took a large position (for me) and about six months later it was at $27 and I sold out. Since then the stock has been on a tear and is current at $97. Still a great company, I just don't buy the valuation currently. When I sold at $27 my plan was to buy it back when it slide back to about $23, which would be a normal pullback after a nice run. It just never happened. But even with the pullback I almost doubled on 20% of my portfolio in six months. You will never get that kind of return from a fund.
I don't like giving investment advice because my approach and risk tolerance is going to be different than almost everyone else, everybody is unique in that regard. If anyone ever has a question, or interest in a particular company, I'll tell you what I see or let you know if it's in an industry I don't feel qualified to judge. Like my post on RAD a few weeks ago, I might throw out the name of something I like, but that doesn't mean it's for everyone.
Do you feel that a broker (with fees) is better than a low cost index fund?
From my research it appears that if you can do it yourself (like you and Raleigh ) then so be it. But throw in the broker fees and it ups your expense ratios and at that point you've got to beat the market by at least 1-2% to make up for those fees - that's not a small task.
From my research it appears that if you can do it yourself (like you and Raleigh ) then so be it. But throw in the broker fees and it ups your expense ratios and at that point you've got to beat the market by at least 1-2% to make up for those fees - that's not a small task.
I would find a fee based broker. You can find one that will charge .5 to 1% depending on the size of the assets under management and what he feels is your growth potential as a customer. I know a guy if you are looking for someone. Stay away from commission based brokers. They will just churn you through trades to make money off you or put you in funds that have a high front end commission to them.
Also, don't kid yourself about the real expense loads on mutual funds. It's hard to find good funds that you don't pay more than a half point a year to own.
Also, don't kid yourself about the real expense loads on mutual funds. It's hard to find good funds that you don't pay more than a half point a year to own.
Investipedia: "On the ex-dividend date, the stock price is adjusted downward by the amount of the dividend by the exchange on which the stock trades."
USA Today: "The reason the stock falls when a stock goes ex-dividend is simple. When a dividend is paid, a portion of the company's value is being transferred from the company's bank account to the accounts of investors. That draw down in value is to be expected because paying a dividend reduces the value of a company's assets. The ex-dividend date is such a powerful force that it's usually noted in the printed stock price tables in the back of most newspapers."
Scottrade: "When a company issues a dividend, the cash that makes up the dividend payment no longer belongs to the company. Because this is transferred to shareholders, the company's share price is reduced by the amount of the dividend payment on the ex-dividend date."
Hurry Raleigh, go email every website on the internet and let them know they are wrong.
USA Today: "The reason the stock falls when a stock goes ex-dividend is simple. When a dividend is paid, a portion of the company's value is being transferred from the company's bank account to the accounts of investors. That draw down in value is to be expected because paying a dividend reduces the value of a company's assets. The ex-dividend date is such a powerful force that it's usually noted in the printed stock price tables in the back of most newspapers."
Scottrade: "When a company issues a dividend, the cash that makes up the dividend payment no longer belongs to the company. Because this is transferred to shareholders, the company's share price is reduced by the amount of the dividend payment on the ex-dividend date."
Hurry Raleigh, go email every website on the internet and let them know they are wrong.
I sure don't.
First of all, most of these certified financial advisors are jokes. If they can routinely beat the market, they wouldn't be working for Edward Jones. Look at Raleigh, he is certified and doesn't even know what a dividend is.
VTI charges .05%. It is silly cheap.
If you can find an advisor that works for a flat fee that would be the way to go if you really want someone to bounces ideas off of. Pay him $100 twice a year to meet with you for an hour each time or something.
That's my understanding as well from the books I've read. They say if you're still not confident then get a fee only financial planner with a fiduciary responsibility.
Its why when you do a stock return hypothetical you always need to look a little deeper. Using Penn's love for hypotheticals....
Had you invested 10K in GE in 1997, that 10K would be worth more than ~30k today (split adjusted and not including the reinvestment of the dividends paid over that time.... which would have yielded an even higher account value)
Who would have the bigger account after that time MU? Penn's VTSMX (up the hypothetical 110%) or boring old GE stock. You do the math.
Again, no one was suggesting GE was a growth momentum play on the market. But in this specific case, anyone who owned GE in '97 and held it to the present has more money in their account than had they taken Penn's advice and bought VTSMX.
This post was edited on 4/9 3:47 PM by raleighherdfan
Amazingly Penn. The very next sentence in your Scottrade quote says what I essentially stated above and I will retype below.
For stocks with small dividend payments, you may not even notice the decrease; one or two cents per share may look like normal trading activity. Bigger dividend payouts, however, can be more noticeable.. Scottrade
A regular qtrly dividend (as it relates to the share price of a stock) has limited to no immediate effect on the price it ultimately trades in the market. Especially if the dividend amount is known and not considered excessive by the market: me
The Bigger dividend payouts referred to by Scott, happen to be the special dividends payouts I also mentioned above in an earlier response.
In the case of a "special-one time" dividend (a bonus dividend) you indeed see a big decrease in the share price: me
No need for me to contact anyone. Its basically what I have been saying.
Just wondering which amount of $$$ you think is larger? I doubt MU will answer. $33k or $22k?
While some seem focused on looking up definitions and ignoring certain components of their hypotheticals that show them to be short sighted in the growing $$$ category, thought I might add another example of a slow, boring, moving stock since 1998. MSFT vs. Penn's suggested VTSMX 110% ( assuming his math is correct) move over that time. MSFT??? Yes...a stock which genius investors like MU and Penn may deem unworthy and mock as pointless based on simply looking at the share price on a start and end date, while ignoring the actual "growth" in $$$ in one's account.
Using Penn's same hypothetical purchase time in early '98, a $10k investment in MSFT (simply holding the stock, enjoying the splits, collecting the dividends, and letting that cash payout build without reinvestment back into MSFT stock) would yield an account worth ~$27k. Yes, even a boring "dead money" stock like MSFT would make you more wealth and (hypothetically) given you a better return than VTSMX. Again, the last time I checked, 27k > 22k and 170% >110%, but, then again, lets see what "the guru's" say.
Disclaimer for those who intentionally ignore or change the context of the discussion: Simple hypothetical based on real numbers and stock data comparing MSFT and VTSMX. My mention of MSFT is in no way suggesting this is a stock one must buy or should buy for their portfolio. One is encouraged to seek out their own investment advice and select an investment they believe is appropriate for them. Additionally, if you worry more about Dividend definitions, Penn is your guy. If you are more interested in bitching about Fed Policy, the impending implosion, and the need to stock pile canned goods, call on MU.
Using Penn's same hypothetical purchase time in early '98, a $10k investment in MSFT (simply holding the stock, enjoying the splits, collecting the dividends, and letting that cash payout build without reinvestment back into MSFT stock) would yield an account worth ~$27k. Yes, even a boring "dead money" stock like MSFT would make you more wealth and (hypothetically) given you a better return than VTSMX. Again, the last time I checked, 27k > 22k and 170% >110%, but, then again, lets see what "the guru's" say.
Disclaimer for those who intentionally ignore or change the context of the discussion: Simple hypothetical based on real numbers and stock data comparing MSFT and VTSMX. My mention of MSFT is in no way suggesting this is a stock one must buy or should buy for their portfolio. One is encouraged to seek out their own investment advice and select an investment they believe is appropriate for them. Additionally, if you worry more about Dividend definitions, Penn is your guy. If you are more interested in bitching about Fed Policy, the impending implosion, and the need to stock pile canned goods, call on MU.
This doesn't even make any since. Microsoft has had huge growth since 97. It has destroyed VTSMX based on stock price alone not even looking at dividends.
Breaking news by Raleigh here. Owning Microsoft in 97 would have been smart. Let's go ahead and toss in water is wet and fire is hot.
The point of VTSMX is the fact you match the stock market. If we could predict the future, of course we would be better off. The data shows very very few can routinely beat the market.
Will make complete since when you learn the ability and have the honesty to stay within the premise of the point you were originally trying to make Penn. Let me remind you of your original assertions within this thread......"Dividend paying stocks have limited opportunity for stock price appreciation and return vs. an Index fund....""VTSMX outperformed companies like GE....." You questioned another posters logic and their consideration for buying a company like GE, because "that's gone nowhere since the late 90's vs. VTSMX. Your narrowly viewed assertions proved inaccurate and incredibly foolish when looking at actual $$$ outcomes.
Maybe I should ask you Penn? How did you come up with the $110% "return" and "growth" on VTSMX Penn? I am assuming the basis for your hypothetical was a buy and hold scenario...never selling a share during the period you claimed such fabulous returns, over "dead money" stocks like GE. Which is also EXACTLY what I did when calculating what someone's account would actually be worth today buying $10k worth of GE stock and again with MSFT stock vs.VTSMX. I even went a step further, for simplicity sake, and withheld the greater compounding principle of reinvesting the cash earned from dividends back into stock purchase over those years, allowing the cash to simply sit idle in the account, or the value of the hypothetical accounts and returns would have been even greater than was shown vs. your VTSMX scenario.
Not surprisingly , what doesn't make sense to most under your scenario (and clearly you based on your flip flopping assertions) is the fact that a company's share price, that would have been bought at ~$97 and now sells~$25 (in your opinion was/is dead money); another company's share price that would have been bought at ~$102 and now sells ~$41 (in your opinion is a "growth" juggernaut)..... both end up netting an investor more $$$$ when starting out with the same $10k vs. your original suggestion of buying an Index Fund stock ~$25 and it selling at ~$52 during the same period.
Of course a wise person who wants to actually maximize returns in their portfolio would read through a thread like this and see a clear compounding reason for this type of catalyst, would ignore trying to decipher words like, "growth" or "value", with multiple connotations, get to work learning more about such a catalyst/strategy, and most likely laugh at the person telling everyone that they know "fire is hot and water is wet" during an investment discussion .
Maybe I should ask you Penn? How did you come up with the $110% "return" and "growth" on VTSMX Penn? I am assuming the basis for your hypothetical was a buy and hold scenario...never selling a share during the period you claimed such fabulous returns, over "dead money" stocks like GE. Which is also EXACTLY what I did when calculating what someone's account would actually be worth today buying $10k worth of GE stock and again with MSFT stock vs.VTSMX. I even went a step further, for simplicity sake, and withheld the greater compounding principle of reinvesting the cash earned from dividends back into stock purchase over those years, allowing the cash to simply sit idle in the account, or the value of the hypothetical accounts and returns would have been even greater than was shown vs. your VTSMX scenario.
Not surprisingly , what doesn't make sense to most under your scenario (and clearly you based on your flip flopping assertions) is the fact that a company's share price, that would have been bought at ~$97 and now sells~$25 (in your opinion was/is dead money); another company's share price that would have been bought at ~$102 and now sells ~$41 (in your opinion is a "growth" juggernaut)..... both end up netting an investor more $$$$ when starting out with the same $10k vs. your original suggestion of buying an Index Fund stock ~$25 and it selling at ~$52 during the same period.
Of course a wise person who wants to actually maximize returns in their portfolio would read through a thread like this and see a clear compounding reason for this type of catalyst, would ignore trying to decipher words like, "growth" or "value", with multiple connotations, get to work learning more about such a catalyst/strategy, and most likely laugh at the person telling everyone that they know "fire is hot and water is wet" during an investment discussion .
Here's the thing with buying an index fund, you are relegating yourself to the fact that a good year will only occur in years the market overall does well and your best outcome is to match the market less your cost of ownership.
It's just a bad approach on its face. Let's say you buy an index fund meant to simulate the return of the DOW. All the fund does is buy shares of each of the DOW 30 in the proper proportion. Any monkey could do that. How easy is that to beat? Eliminate the 10 companies of those 30 that you believe the worst. You will be wrong on a few, but generally a consensus opinion on each company is easily found. You do that and you will beat the index fund every year.
It's just a bad approach on its face. Let's say you buy an index fund meant to simulate the return of the DOW. All the fund does is buy shares of each of the DOW 30 in the proper proportion. Any monkey could do that. How easy is that to beat? Eliminate the 10 companies of those 30 that you believe the worst. You will be wrong on a few, but generally a consensus opinion on each company is easily found. You do that and you will beat the index fund every year.
