why do people fixate on dividends and "income" type funds?
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why do people fixate on dividends and "income" type funds?
why do people fixate on dividends and "income" type funds?
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Because they have a low risk profile
by what metric?
fpbp. Damn, I was going to write a wall of text and you nailed it in seven words. Bravo to you. Have a picture of my waifu.
Mine now
Rude. My wife is a goddess.
That's a man.
1. low T males
2. females
3. old people
Hmmmm why do people with money not gamble on dog coins. Really makes you think.
i mean why dividends as opposed to other stocks.
Because companies that pay dividends do so because they have already won. They aren't about growing anymore as much as simply existing and continuing to make a profit. If you aren't growing you need to have some sort of value extraction method for owning the stock. That value extraction is dividends. So even though it pays less that some meme growth stock, it still pays and with a lot less risk involved. And if you hold a large position in the that meager percentage it pays a lot of money with little risk
You haven't made it yet you wouldn't understand
Once you have $2 million then you can live off of six figures worth of dividend payments per year and never have to dip into the $2 million principle.
I bought a 300k lambo tho
Now at 1.9m
but youre still "dipping into" your portfolio whenever you decide to keep a dividend payment instead of reinvesting it. theyre interchangable with selling some stock, both result in money taken out of your portfolio value
>even though it pays less that some meme growth stock, it still pays and with a lot less risk involved
is this quantifiable?
>but youre still "dipping into" your portfolio
but you are rich, you want things easy, so you just recieve the dividend, as long as your initial investment goes above inflation your main stack keeps compounding
Now which ETFs pay dividend and stay above inflation? not sure, an alternative would be, MSCI or SP500 and withdraw 3/12 monthly.
so its just a convenience thing for rich retirees? or whats your point
Some people like actually making (and taking) profits. I know this is hard for degenerates to understand.
Anons literally cannot fathom getting off the growth at all costs treadmill l.
It's like some stonetoss comic where the punchline is "profits??"
would you consider a dividend payment more desirable than the stock going up by the same amount?
In some ways, yes. Obviously it's basically the same effect, but psychologically speaking dividends have a nice way of forcing you to take profits. Also there are certain tax advantages.
For example, if I, (canada Black person) earn dividends from canadian equities in my TFSA, then that income is completely tax free. I'll take tax free passive income any day of the week, even if i might have to give up some % of potential upside with growth stocks.
You can take profits without lowering your position and or you can reinvest the dividend which is like increasing your position for free.
>You can take profits without lowering your position
no, dividends come directly out of the stock price because theyre not a free money glitch
>you can reinvest the dividend which is like increasing your position for free.
its not free, youre just going back to the state before the dividend was paid (in terms of portfolio value, yes you will have more shares but each will be worth less)
ignoring brokerage fees.
Look at it from the business side of things, and take Apple as an example. Apple has been sitting on a shitton of cash for over a decade, and basically squandered it. It wasn't used to develop new products, it just sat there losing a shitton of value to inflation. Yes, they kept their dividend small and the price of the stock went high, but the money would have been better spent disbursed to investors to put into productive use rather than just indirectly fund wasteful government spending.
Some companies just generate so much profit that they CAN'T reinvest it into their primary business and grow. They're just maxed out. So all this cash piles up and gets wasted by inflation. That money SHOULD be distributed to investors so that it can be reinvested in OTHER businesses to continue making profit.
apple has had good returns so i dont really see how this example helps your case, but you cant take a single stock and extrapolate from that either way.
>Some companies just generate so much profit that they CAN'T reinvest it into their primary business and grow. They're just maxed out. So all this cash piles up and gets wasted by inflation. That money SHOULD be distributed to investors so that it can be reinvested in OTHER businesses to continue making profit.
sure i agree with this. but my point is that dividend yields say nothing about total expected return, not that theyre bad.
>basically squandered it
their stock price would beg to differ, it's a little trick called "buybacks", and guess what? No CGT
There are two types of dividends. Some pay in cash some pay in stock. For example Verizon pays in cash.
>some pay in stock.
isnt that just a split?
you moron you're talking about stock dividends not cash, cash dividends come from company earrnings
i am not talking about stock dividends
>cash dividends come from company earrnings
obviously, but they still have a net zero effect on your net worth when theyre paid out.
Lots of investors persistently misunderstand dividends. Perhaps they see a dividend as free money or they think the stock market, for some reason, tends to undervalue dividend-paying companies.
Because they’re boomers who don’t realize it costs nothing to sell stock in their brokerage account, probably.
I think people like the idea of receiving a dividend psychologically. To them it’s like they’re being rewarded for holding, even though it isn’t really. I hold VTI and AAPL, but of which pay a pretty small dividend that I reinvest in the stock. So for me receiving the dividend is more of an inconvenience because I’m keeping it in the stock but I have to pay taxes on having received the dividend. It would be better if I just had a commensurate growth in the stock price instead of the payout. There are some people who like the idea of a dividend because it imposes some discipline on the company, like forcing them to have x amount of cash on hand to pay out the dividend. It kind of makes sense. But at the same time that discipline comes at a cost of growth often and it’s also fairly common for a dividend to be slashed over time as the company can’t meet the obligation.
>but I have to pay taxes on having received the dividend
Isn't there like at least three different ways to avoid paying taxes on reinvested dividends?
not that I’m aware of
mostly just
>cash flow for living expenses or other investments
>reduced dependency on market downturns
otherwise buying growth stocks that don't pay a dividend, you can just sell a small % each year. say you have $1m S&P investment and want to take out $50k/year, and the S&P is growing by 10%/yr.
year 1
>$1m-$50k = $950k
year 2
>$1,045,000-$50k = $995k
year 3
>$1,094,500-$50k = $1,044,500
etc.., but perhaps year 4 the S&P loses 10%, whereas a dividend stock with 50 years of dividend growth continues to increase their dividend. a lot of it is psychological.