Traders love passive revenue. They fantasize about sitting on the seashore, ingesting pina coladas whereas their dividend checks roll in.
Nonetheless, every dividend fee causes the inventory worth 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 basic idea.
Most significantly, to realize the historical past complete fairness market returns you should reinvest these dividends. An argument could possibly 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 laborious…)!
Given the quantity of funds launching with a magical 25%, 50%, and even 100% yields, it’s laborious 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.