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Old 08-21-2019, 07:54 PM
 
2,468 posts, read 2,103,352 times
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Quote:
Originally Posted by mathjak107 View Post
Nope you need a lesson...you are misinformed.....

Every dividend has a mandatory reduction in share price by the same amount before it can trade ...it is automatically done and all compounding is on your opening invested dollars left .

A dividend also has nothing to do with profit or not it is an amount paid out approved by the board in good and bad years

If you have a 100k invested and it pays out a 10% dividend what you end up with for markets to compound on at the ring of the bell is 90k and 10k in pocket .. if that stock doubles you have 180k and 10k in pocket ....

The company sold off a piece of your share price in effect and handed it to you .


If I have a portfolio of non div payers and I have 100k and sell off 10k worth , I have 90k left and 10k in pocket ...if it doubles I have the same 180k and 10 k in pocket .


It works the other way too in down markets ..


If you have 100k and it pays 10% out ,you have 90k left and 10k in pocket ...markets fall 50% ,,you have 45k left

I pull 10k out of my non div payers and I I have 90k left ..if it fell 50% we have the same 45k ..

The problem is you donít understand how dividends work and every pay out must have a mandatory reduction before markets can compound up or down on it .

Without offsetting the dividend amount with as much appreciation it just drives the stock price lower and lower with each payout .... a down market always has the same effect dividend or not..there is no difference between selling a piece of a portfolio or selling a piece of a share price .

In both cases they both will go to zero value without enough compounding to offset what was paid out ....

Investing is about dollars being compounded on , not how the value is made of share wise ...that is why a stock split has no change in value
So it is a given, when a dividend is paid out, the stock price will drop that day?
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Old 08-21-2019, 07:59 PM
 
72,901 posts, read 72,721,455 times
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Quote:
Originally Posted by jasperhobbs View Post
So it is a given, when a dividend is paid out, the stock price will drop that day?
Actually the day it goes what is called ex div it is set back .. ...when you get the payment could be a different day.

It is no different then a mutual fund distribution ...they go ex div ...and when it opens it starts out lower ...if you reinvest you have a different share amount but the exact same dollars you did before it went ex div.

Basically it took the same amount as you had and rearranged pockets .. but still the same dollars being acted on by the markets. A 10% gain or loss is the same regardless how the value is arrived at share wise.

paying out with no appreciation in a down market just drives any loss deeper as the payout compounds on the market losses.

If the stock was already down 5% and pays a 10% dividend then it becomes a 15% loss once adjusted. The market action needs to overcome that 15% loss by appreciation.

So paying that dividend out increased a 5% loss to a 15% loss .


This is very important to understand about bear markets and dividends...there is no magic money feeling delivered by the dividend fairy on their unicorn which isolates you from a down market

Last edited by mathjak107; 08-21-2019 at 08:15 PM..
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Old Yesterday, 05:51 AM
 
38,900 posts, read 15,252,729 times
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During the last financial meltdown, many folks lost close to a third of what they'd saved for retirement. Took years to recover and many delayed retiring or changed their retirement plans to accommodate their reduced financial situation.

Many counted on the equity in their home funding a downsizing move, only to find their homes difficult to sell even at prices lowered to be competitive.

Government services are impacted. Depending on how much you depend on government services, one may find retirement far less pleasant.

Not to mention, grown kids can lose their jobs and move back home. So just when you think expenses are going down, they go up.

Recessions are a nightmare for retirement planning.
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Old Yesterday, 06:01 AM
 
72,901 posts, read 72,721,455 times
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Quote:
Originally Posted by GotHereQuickAsICould View Post
During the last financial meltdown, many folks lost close to a third of what they'd saved for retirement. Took years to recover and many delayed retiring or changed their retirement plans to accommodate their reduced financial situation.

Many counted on the equity in their home funding a downsizing move, only to find their homes difficult to sell even at prices lowered to be competitive.

Government services are impacted. Depending on how much you depend on government services, one may find retirement far less pleasant.

Not to mention, grown kids can lose their jobs and move back home. So just when you think expenses are going down, they go up.

Recessions are a nightmare for retirement planning.
While recession are not fun ,retirees have had to deal with them forever ..... many here retired in 2008 and 2009 and no one lost a penny . If people lost money it was their own bad behavior not markets ...and it certainly did not take long For portfolios to comeback .

So a lot of this 2008 hoopla about retirement portfolios being devastated is either false stories parroted or poor investor behavior but it certainly was not stock and bond markets and any form of extended downturn

a typical 60/40 portfolio was down in the 30% range in 2008 and up almost 30% in 2009 ......

My own was down 33% in 2008 and up 28% in 2009 and up 12% in 2010 .....in the end portfolio wise it was pretty much ado about nothing..

Typical retiree portfolios ranging from 40-60% equities were only an issue for one year ,2008.

Today the 2008 retiree is no different then any other average retiree group in our history

Last edited by mathjak107; Yesterday at 06:33 AM..
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Old Yesterday, 06:45 AM
 
2,411 posts, read 843,829 times
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Quote:
Originally Posted by mathjak107 View Post
So a lot of this 2008 hoopla about retirement portfolios being devastated is either false stories parroted or poor investor behavior but it certainly was not stock and bond markets and any form of extended downturn
I haven't been through a recession in retirement so I hesitate to sound too dogmatic about this, but when I read about people who "lost their retirement savings" in a downturn I figure it's because:

1. They needed $X from the portfolio each year to meet expenses, whether it was a sustainable % or not, so they kept withdrawing what they needed and there wasn't enough left after the recovery to make them whole. One of my friends on FB (retired, early 60s) was complaining once about some big out-of-pocket medical expenses and saying they'd have to dip into their "meager savings" to pay them. I suspect they're not well-positioned to weather a downturn.

2. They had underperforming investments that never recovered. I saw that in the 2001 crash. If you were loaded up on Enron it wasn't coming back. About every 6 months I go through my investments and weed out underperformers.

3. They had too much in equities.

4. They panicked and sold at the bottom.

5. They lost their jobs, couldn't find another one and went through their retirement savings early. A friend who's a realtor- a good one, been in the business for years and knows her stuff, spent a lot of her retirement funds in the recession because business dried up. Another, an architect who designs sports structures, told me the same thing.
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Old Yesterday, 06:54 AM
 
1,829 posts, read 632,982 times
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Quote:
Originally Posted by mathjak107 View Post
While recession are not fun ,retirees have had to deal with them forever ..... many here retired in 2008 and 2009 and no one lost a penny . If people lost money it was their own bad behavior not markets ...and it certainly did not take long For portfolios to comeback .

So a lot of this 2008 hoopla about retirement portfolios being devastated is either false stories parroted or poor investor behavior but it certainly was not stock and bond markets and any form of extended downturn

a typical 60/40 portfolio was down in the 30% range in 2008 and up almost 30% in 2009 ......

My own was down 33% in 2008 and up 28% in 2009 and up 12% in 2010 .....in the end portfolio wise it was pretty much ado about nothing..

Typical retiree portfolios ranging from 40-60% equities were only an issue for one year ,2008.

Today the 2008 retiree is no different then any other average retiree group in our history

Good post!
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Old Yesterday, 07:21 AM
 
72,901 posts, read 72,721,455 times
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Quote:
Originally Posted by athena53 View Post
I haven't been through a recession in retirement so I hesitate to sound too dogmatic about this, but when I read about people who "lost their retirement savings" in a downturn I figure it's because:

1. They needed $X from the portfolio each year to meet expenses, whether it was a sustainable % or not, so they kept withdrawing what they needed and there wasn't enough left after the recovery to make them whole. One of my friends on FB (retired, early 60s) was complaining once about some big out-of-pocket medical expenses and saying they'd have to dip into their "meager savings" to pay them. I suspect they're not well-positioned to weather a downturn.

2. They had underperforming investments that never recovered. I saw that in the 2001 crash. If you were loaded up on Enron it wasn't coming back. About every 6 months I go through my investments and weed out underperformers.

3. They had too much in equities.

4. They panicked and sold at the bottom.

5. They lost their jobs, couldn't find another one and went through their retirement savings early. A friend who's a realtor- a good one, been in the business for years and knows her stuff, spent a lot of her retirement funds in the recession because business dried up. Another, an architect who designs sports structures, told me the same thing.
Bottom line is it was bad planning .. not having enough to meet short term needs , using long term investments for short term needs , fear, speculating in individual stocks and taking on huge individual company risk and trying to time things that went wrong are the most frequent reasons ... I bet mostly all will tell you it was the markets that caused their losses
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Old Yesterday, 07:42 AM
 
Location: SoCal
13,875 posts, read 6,620,462 times
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On ER forum, there’s one person retired for 20 years already, 2 recessions under her belt. It takes planning, she’s an engineer, she’s much more savvy when it comes to managing her investments and her emotions. It can be done, but I think the average Joe will just panick, as we see here often in C-D, and probably sells everything. As we saw some of this behavior in Dec.
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Old Yesterday, 08:02 AM
 
14,348 posts, read 24,169,551 times
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Quote:
Originally Posted by athena53 View Post

2. They had underperforming investments that never recovered. I saw that in the 2001 crash. If you were loaded up on Enron it wasn't coming back. About every 6 months I go through my investments and weed out underperformers.

3. They had too much in equities.

4. They panicked and sold at the bottom.

5. They lost their jobs, couldn't find another one and went through their retirement savings early. A friend who's a realtor- a good one, been in the business for years and knows her stuff, spent a lot of her retirement funds in the recession because business dried up. Another, an architect who designs sports structures, told me the same thing.

A lot of the problem with the 2001 crash was that a lot of people had portfolios that were highly concentrated in the dot.com and other tech sectors. Most of them were in companies that were highly speculative, often without significant revenue streams. Those of us who were much more conservatively oriented (and who spent HOURS on the SEC Edgar website), were much less effected.

Most of my friends who were Realtors or who were in the mortgage industries started trying to insulate themselved from the crash as they quickly understood how goofy mortgage originations were.

Enron ... that was a weird situation. We contracted with them to get energy savings in their plant. To this day, I don't understand how they were making money on the deal. I asked a couple of their senior managers how they could make money selling energy so cheaply. None of them could tell me how Enron made their money. However, they were constantly talking up their stock and some of my employees bought in to all the hype. I refused as they could never answer any of the critical questions.
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Old Yesterday, 08:15 AM
 
7,000 posts, read 3,886,067 times
Reputation: 14308
Quote:
Originally Posted by mathjak107 View Post
Nope you need a lesson...you are misinformed.....

Every dividend has a mandatory reduction in share price by the same amount before it can trade ...it is automatically done and all compounding is on your opening invested dollars left .

A dividend also has nothing to do with profit or not it is an amount paid out approved by the board in good and bad years

If you have a 100k invested and it pays out a 10% dividend what you end up with for markets to compound on at the ring of the bell is 90k and 10k in pocket .. if that stock doubles you have 180k and 10k in pocket ....

The company sold off a piece of your share price in effect and handed it to you .


If I have a portfolio of non div payers and I have 100k and sell off 10k worth , I have 90k left and 10k in pocket ...if it doubles I have the same 180k and 10 k in pocket .


It works the other way too in down markets ..


If you have 100k and it pays 10% out ,you have 90k left and 10k in pocket ...markets fall 50% ,,you have 45k left

I pull 10k out of my non div payers and I I have 90k left ..if it fell 50% we have the same 45k ..

The problem is you don’t understand how dividends work and every pay out must have a mandatory reduction before markets can compound up or down on it .

Without offsetting the dividend amount with as much appreciation it just drives the stock price lower and lower with each payout .... a down market always has the same effect dividend or not..there is no difference between selling a piece of a portfolio or selling a piece of a share price .

In both cases they both will go to zero value without enough compounding to offset what was paid out ....

Investing is about dollars being compounded on , not how the value is made of share wise ...that is why a stock split has no change in value
Nope. You are misinformed.

If you can live off the dividends, a $500,000 portfolio will still exist after 20 years. You will not lose your capital. Through good times and bad times. In fact, the $500k PF will continue to grow in value. Although it will shrink in a recession.

It's like working for a salary vs. working for commission. There's a tradeoff. You get a paycheck at regular intervals, and after 20 years (with luck), you still have that paycheck coming in (only more so, because of wage increases). With a commission job, you get a windfall some years, and you have only expenses with no income in some years (like during a recession).

A person IMO should have asset allocation, and type of investment allocation. A growth portion, a dividend portion, a conservative value equity portion, and so on.

I have high flying stocks that do well, and will consequently sink like rocks during a recession. I have a standard growth section. And I have a dividend investment section that, when coupled with my SS payments, would prevent me from having to sell investments at the bottom of a recession.

Cha-ching.

(Note all the "ifs" in your scenario. IF the equity growth holdings do well, IF this, IF that. "IF" isn't good enough for a retiree in a recession. And I don't suggest that people DON'T have growth holdings. I certainly do. But those will likely go down quite a bit in a recession. However, I will still get the dividends for most of my holdings, regardless of the share price. AND the share price will ALSO continue going up like other stocks, and many will likely NOT go down tothe same extent as my high flying stocks. CHA-CHING.)

Don't forget: It's the big blue chip, well established companies that have the long history of paying dividends. Don't assume that these stocks won't grow like many others. For example, Realty Income pays me a 5.4% dividend (payable monthly); it's an established good company that has paid an increasing dividend for 25 years. It also has held up well during recessions (down 14% in 2008 while the whole market was down 37%). AT&T has paid an increasing dividend for 35 years, and has held up better than the whole market during downturns; it pays me almost 6% dividend. Enterprise Products Pipeline pays me almost 7% dividend and has paid an increasing dividend for 22 years; it, like the others, has held up better during downturns than the whole market. There are no guarantees for any investment performance, of course. But these are good companies with a history of prioritizing the increasing dividends. Retirees frequently focus on these solid dividend-paying companies; they do so for a reason.

Last edited by bpollen; Yesterday at 08:36 AM..
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