Traders love passive earnings. They fantasize about sitting on the seashore, ingesting pina coladas whereas their dividend checks roll in.
Nevertheless, every dividend cost causes the inventory value to drop by an equal quantity. That is investing 101.
Sadly, many particular person buyers (and a non-zero quantity {of professional} buyers) don’t perceive this elementary idea.
Most significantly, to realize the historical past complete fairness market returns you need to reinvest these dividends. An argument might be made that in a taxable account, you don’t need dividends in any respect! Attempt 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.
