Buyers love passive revenue. They fantasize about sitting on the seashore, consuming pina coladas whereas their dividend checks roll in.
Nonetheless, every dividend cost causes the inventory value to drop by an equal quantity. That is investing 101.
Sadly, many particular person traders (and a non-zero quantity {of professional} traders) don’t perceive this elementary idea.
Most significantly, to attain the historical past whole fairness market returns you must reinvest these dividends. An argument might be made that in a taxable account, you don’t need dividends in any respect! Strive advertising and marketing that “no yield” technique (belief me, it’s onerous…)!
Given the quantity of funds launching with a magical 25%, 50%, and even 100% yields, it’s onerous to not get too cynical about our business.
Right here is an easy graphic impressed by HonestMath.com.
Simply don’t publish this to Reddit.
