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Many people are surprised to learn that dividend income and reinvestment can account for nearly 90% of total stock market returns over time.
That's right. Not a quarter… Not half… But 90%.
That's why placing a high priority on dividends in the Money Map Report's proprietary 50-40-10 Strategy is paramount to its success.
Unfortunately, this goes counter to the inclinations of far too many investors. They spend the bulk of their time chasing "the next hot stock" or searching for the next "sure thing."
No doubt we all love the elation that goes with being up 25%, 50%, 100%, or more.
Don't get me wrong, though. I'll take gains like that too – and we get more than our fair share in the Money Map Report model portfolio.
Yet, when it comes to consistently growing and protecting our money, I'd rather focus on getting the cold, hard cash that dividends kick off. That's because I know those are a much bigger component of overall investment returns over time.
I point this out because what most people fail to realize is that successful investing is a matter of continuous performance – NOT instantaneous performance.
Here's where it gets really interesting…
The Returns Can Be North of 1,200%
In some cases, the dividends are so steady and increase so much that over time you can actually make more in dividends than you originally paid to buy the stocks that produced them.
Two of the founding fathers of modern investing made that abundantly clear in the 1930s.
About the Author
Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He's a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to heading The Money Map Report, Keith runs High Velocity Profits, which aims to get in, target gains, and get out clean, and he's also the founding editor of Straight Line Profits, a service devoted to revealing the "dark side" of Wall Street... In his weekly Total Wealth, Keith has broken down his 30-plus years of success into three parts: Trends, Risk Assessment, and Tactics – meaning the exact techniques for making money. Sign up is free at totalwealthresearch.com.
I agree with the (true) value of dividends. Personally, I really like (my) dividends and they are an integral part of my long term stock holdings, as most pay good dividends. Once in awhile, I will add a new stock holding, such as Alibaba, when it IPO last year. However, there sure is no value in buying a growth stock in a speculative market while its making a near term high.
It will take a long time for Alibaba (stock) to show real profits. In contrast, Facebook is riding high with the U.S. Market overall. It is viewed as magical. Pay anything (Billions) for a tech startup ( Instagram) and then watch the stock go way up on the promise of more ad revenue. FB has tiny earnings ($1.03 share) and a huge P/E (87), but investors looking for a gamble and growth love it nevertheless. Meanwhile, I am content to keep collecting my dividends. As you say, consistency pays. Sex sells.
Agreed. Stock Market is basically another type of gambling where we speculate the returns many times never happens & the trend goes against you. So lately, what I found that you must go with the majority of the investors to gamble & come out with profits as profit taking never become bankrupt . We chase the high return dividend stocks, and found fall victims when the trend goes against that dividend cannot compensate the price declines & vis-a-vis loss incurred.
Hi Keith,
How did you calculate (or source) the figure in the statement, "dividend income and reinvestment can account for nearly 90% of total stock market returns over time."?
Thanks from your avid reader,
Jonathan
I had the same question ""dividend income and reinvestment can account for nearly 90% of total stock market returns over time."?"
Then I re-read it more carefully and noticed the word "can". then I wondered why it was included in the statement, because it nullifies the truth.
I was a big investor in the 80's. Then I became a business owner until a few years ago. Now back to moderate investing.
Here's what I have discovered: the same words of stock market advice back then are the exact same as being spoken today by so called investment gurus and newsletter writers.
This go around I choose to ignore it, because there is always the 'next best thing' being touted. Best regards, LT
I am nearing retirement. Dividends and safety mean more to me than wild flyers. I look forward to receiving your publications.