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you can't compound on what you give away. personally i don't need my money back if i choose to invest in a company. if you can't grow my money and compound all of of it then perhaps there are better companies today that can . they can keep their equity give backs , i am giving them the money in the first place becaise i felt they could do a better job compounding it then i could .
giving me my money back and forcing me to invest it elsewhere is really silly in theory. if i choose instead to reinvest those dividends than for the reasons above we really just switched pockets and nothing gained nothing lost..
if you can't trust the company you are investing in to do the right thing with your money than i say you shouldn't be investing in the company at all.
Last edited by mathjak107; 01-10-2015 at 02:33 AM..
you can't compound on what you give away. personally i don't need my money back if i choose to invest in a company. if you can't grow my money and compound all of of it then perhaps there are better companies today that can . they can keep their equity give backs , i am giving them the money in the first place becaise i felt they could do a better job compounding it then i could .
giving me my money back and forcing me to invest it elsewhere is really silly in theory. if i choose instead to reinvest those dividends than for the reasons above we really just switched pockets and nothing gained nothing lost..
if you can't trust the company you are investing in to do the right thing with your money than i say you shouldn't be investing in the company at all.
Then your theory would suggest all companies that have reached maturity in a growth curve aren't worth investing in. It's interesting that you invest in S&P 500 funds and don't put all your money in small caps.
depends if you want stability and some less volatility or you want maximum compounding today. there are lots of investors who want some growth but less volatility and risk so large caps are great for them.
if it is option 2 than going forward yes you may want to look elsewhere.
the last 5 years up to 2014 the year nothing else mattered you would have seen not only 5-6% better returns each year but better returns on more money if you didn't reinvest the dividends.
that is a huge difference in compounding and all you needed was mid-caps and small caps. those midcaps are still pretty big companies. 2-10 billion in market capitalization are sizeable companies.
in fact if i was in my accumulation stage now most of my money would be out of large caps and in mid-caps as of this year.
Last edited by mathjak107; 01-10-2015 at 08:22 AM..
Exactly. A dividend is just a by-product of a mature company. Succesful mature companies make money, owning a company that consistently makes money is ownig a stable company.
i do not buy into that concept at all anymore. but thats my opinion. it is more a reflection on a has been for growth and compounding who's best days came and went..
they still have great use but balls to the wall growth is no longer what they do.
Last edited by mathjak107; 01-10-2015 at 08:43 AM..
Companies that don't make money typically take huge hits to their share price in bear markets as people realize the end goal of any company should be to make money. As they say it's easy to make money in a bull market because everything is going up. Look at all the dotcom companies that had near exponential revenue growth but were still not making money. What happened to most of those?
Hoarding cash is a very inefficient way to allocate capital from a business standpoint. You seem to stuck on the idea of the tax inefficiency of dividends.
Of course hoarding cash is inefficient, I was simply making a point. And I never got into the tax inefficiencies of dividends, so I'm not sure where that's coming from.
I have nothing against dividends per se. Sometimes it makes perfect sense for companies to pay them, and from the shareholders standpoint, receiving dividends isn't necessarily a bad thing either, we all know that. I'm just arguing against the idea that dividends are always the ultimate goal for investors, or that "you want every company to pay you a dividend or you would never invest in them," as you put it.
I was referring to you in the general sense, not you as in every person cares about dividends. The ultimate goal of any company is to realize profits for the owner or they wouldn't start the business in the first place. You personally may only care about appreciation of the perceived value of the company, but the market dictates the value of any company. If you personally owned Amazon and decided to sell it after it had grown to a specific size, but told the new owner you could buy a company that will continue to grow at 10% for the next 5 years and will then reach near market maturity and grow at a rate slightly higher than inflation for the foreseeable future after that and on top of that the company will never pay any profits back to shareholders, how much do you think someone would be willing to pay you for your portion of Amazon?
I would be willing to bet the P/E multiple on a company like that would be well under 10. What would end up happening is the company would become inefficient with its capital or essentially invest it for you. If I want a company to invest it for me I will pay a professional, not Amazon.
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