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Ignoring the gibberish, I will answer bmw335xi's OP question.
No, I have not recently lost a lot of money in the stock market. Most of my stocks are still way up in positive territory since I did not purchase them just recently, but back in 2005-2009. (I grew my money via mutual funds between 1996 and 2005.)
What has happened is that I have increased the number of shares by reinvesting dividends. I could have taken those dividends as cash and invested in something else, but either way my wealth is increasing. The companies did not sell any of my shares in order to pay the dividend, but paid money from profits, new money as it were. Unless companies create new share offerings, my percentage ownership of the companies is increasing as I buy more shares from someone else who is selling. Really simple. No need for gibberish.
"Gains" and "losses" are only realized at the time of sale.
Ignoring the gibberish, I will answer bmw335xi's OP question.
No, I have not recently lost a lot of money in the stock market. Most of my stocks are still way up in positive territory since I did not purchase them just recently, but back in 2005-2009. (I grew my money via mutual funds between 1996 and 2005.)
What has happened is that I have increased the number of shares by reinvesting dividends. I could have taken those dividends as cash and invested in something else, but either way my wealth is increasing. The companies did not sell any of my shares in order to pay the dividend, but paid money from profits, new money as it were. Unless companies create new share offerings, my percentage ownership of the companies is increasing as I buy more shares from someone else who is selling. Really simple. No need for gibberish.
"Gains" and "losses" are only realized at the time of sale.
This thread was from 2014, just goes to show you how this isn’t the first time people are scared about the stock market. My advice back then still works today.
However, I disagree with your last statement. Tax purposes yes, it’s correct, reality I disagree. If you try to get a loan and they ask to see your assets they only care about your current balance. If you are down 50% you can’t claim, no no I have $500,000, not $250,000 because I haven’t sold it, so you better say I have $500,000 Mr! That won’t fly because there is no guarantee it will go up. If there was then anyone who doesn’t own it ahould be taking out second mortgages to buy it.
Ignoring the gibberish, I will answer bmw335xi's OP question.
What has happened is that I have increased the number of shares by reinvesting dividends. I could have taken those dividends as cash and invested in something else, but either way my wealth is increasing. The companies did not sell any of my shares in order to pay the dividend, but paid money from profits, new money as it were. Unless companies create new share offerings, my percentage ownership of the companies is increasing as I buy more shares from someone else who is selling. Really simple. No need for gibberish.
"Gains" and "losses" are only realized at the time of sale.
you need to add new money and buy more equity and add to holdings increasing dollars invested beyond what you had . reinvesting merely switches the existing value around so it is configured differently but adds no more new dollars . in fact it does the opposite if you do not reinvest and leaves you with less dollars starting out being acted on .
if you have 1000 shares of a 100 dollar stock, that is 100k invested
.if it falls 10% over the quarter to 90k and pays a 10% dividend you will have 81k left invested after the mandatory roll back and 9k in pocket so you have 1000 shares at 81 a share left for markets to act upon . if you reinvest the 9k back in back in at this reduced price of 81 dollars you will have 1111 shares at 81 a share making up the same dllars you had .
it is no different then a stock splt . you will have more shares but at a reduced value so your dollars invested you closed with the night before are still the same dollars you had invested prior , only now are more shares at a lower price equaling IN DOLLARS what you had the night before.
geeesh , why is this simple concept so difficult to understand . if you reinvest you have the same dollars invested in total that you had , if you don't reinvest then you pulled money out of the investment . you now have less invested for the market action to work on .if we could hypothetically have two classes of the same stock and one paid a div and the other did not .
the same total return would end up years down the road at the same value . you would end up with more shares at a lower price reinvesting the dividend and the non payer would end up with less shares at a higher price since it never had price set backs with each payout along the way . . .
Last edited by mathjak107; 11-23-2018 at 02:33 AM..
This thread was from 2014, just goes to show you how this isn’t the first time people are scared about the stock market. My advice back then still works today.
However, I disagree with your last statement. Tax purposes yes, it’s correct, reality I disagree. If you try to get a loan and they ask to see your assets they only care about your current balance. If you are down 50% you can’t claim, no no I have $500,000, not $250,000 because I haven’t sold it, so you better say I have $500,000 Mr! That won’t fly because there is no guarantee it will go up. If there was then anyone who doesn’t own it ahould be taking out second mortgages to buy it.
you are correct and teak is wrong again . .
realizing gains and losses has zero to do with the fact that at any given point in time that is your net worth and all that investment is worth .
it may never come back .
in fact a retirement income is based on asset value at the time you take a snap shot , whether realized or not
it is silly for anyone to think that if they closed out their position each night and re-bought the same position in the morning , that those investment values count but if they left the same money in play over night without closing them out , somehow it is magically different and does not count as your value .
of course it does , all keeping the money in play means is your balance is variable and can change , like working on commission would be .
so never confuse the fact that sell or not that is your investment value , with the fact that at that moment you have no reason to care what the value is .
selling and realizing a gain or loss just closes out a position and may create a tax situation but your investment value will always be what it is whether you care to count it that way or not . .
Last edited by mathjak107; 11-23-2018 at 03:17 AM..
.if it falls 10% over the quarter to 90k and pays a 10% dividend you will have 81k left invested after the mandatory roll back and 9k in pocket so you have 1000 shares at 81 a share left for markets to act upon . if you reinvest the 9k back in back in at this reduced price of 81 dollars you will have 1111 shares at 81 a share making up the same dllars you had .
Yes, a dividend reinvestment is a wash. The company pays out some of their profits, and the stock price adjusts downward overnight. However, the price usually doesn't stay at that level. The price can go down if investor expectations are lowered, or go up if investor expectations are raised.
The fallacy of your poorly worded arguments is that the stock price is tied directly to dividend payouts other than the overnight rollback. It isn't. Stock prices are not based upon book value, the amount of cash on the balance sheet, the value of equipment and contracts, and etc. It is based solely upon expectations which are usually intangible to most investors. If I want to buy shares in a company today, I have to pay the price that is on offer, not some price that I determine based upon tangibles.
Profits are new money to a company. Profits paid out to investors is new money in that I can choose to reinvest that new money into a lowered share price (due to rollback) and end up with MORE shares. Thus, I have a greater percentage ownership of that company without adding any of my old money. That is compounding.
As to unrealized losses and gains, I am correct if I don't care about the current "snapshot" of my net worth. I haven't borrowed money in over 30 years so getting a loan is a non-event for me.
that level that it is reduced to is your opening BALANCE . if markets go up 100% it is 100% from the reduced balance that quarter . of course the markets take the stock wherever it wants it to go but we are talking about compounding your dollars invested at the end of the day ..
100% gain on 5% less invested because you took the dividend and spent it , gives you 5% less then you had pre div when you start trading at the ring of the bell and that is less money being acted upon .!
if you reinvest you have the same invested dollars you had pre dividend only now you have more shares at a lower price making it u p . but it is still the same dollars you had being acted on prediv .if it doubles you have the same 100% gain you would have had if no div was paid with no reduction .
let this sink in because you are off in left field with your constantly saying the stock does not stay at the reduced level . of course it doesn't but your dollars invested and act upon percentage wise were reduced if you take that div . if you reinvest dollars invested are just what you had pre div .
again , look at the example and let it sink in .
if you have 1000 shares of a 100 dollar stock, that is 100k invested
.if it falls 10% over the quarter to 90k and pays a 10% dividend you will have 81k left invested after the mandatory roll back and 9k in pocket so you have 1000 shares at 81 a share left for markets to act upon . if you reinvest the 9k back in back in at this reduced price of 81 dollars you will have 1111 shares at 81 a share making up the same dollars you had .
it is no different then a stock splt . you will have more shares but at a reduced value so your dollars invested you closed with the night before are still the same dollars you had invested prior , only now are more shares at a lower price equaling IN DOLLARS what you had the night before.
it does not matter if it stays at the reduced level , goes up or goes down , that is the part you are not grasping .
that level that it is reduced to is your opening BALANCE . if markets go up 100% it is 100% from the reduced balance .
100% gain on 5% less invested when you start at the ring of the bell is less money!
if you reinvest you have the same invested dollars you had pre dividend only know you have more shares at a lower price making it u.if it doubles you have the same 100% gain you would have had if no div was paid with no reduction .
Invested dollars is what one puts in to buy the stock in the first place. That doesn't change.
Reinvesting dividends buys more shares. When the price rolls back overnight after a dividend payment, the number of shares does not roll back.
Look at the number of shares. You and I talk past each other because you define invested dollars differently.
The daily price fluctuations are simply noise. I watch the number of shares grow; that is an upward trend. Over a long enough time period, say 30-40 years, the chance of losing money overall is very low.
Here is an example of your fallacy.
Quote:
100% gain on 5% less invested when you start at the ring of the bell is less money!
But a 100% gain on 5% more shares is more money!
Actually, 5% less "invested" (your definition) due to rollback equals 5% more shares due to reinvestment which means the 100% gain creates the same amount of money either way. It is a wash.
Invested dollars is what one puts in to buy the stock in the first place. That doesn't change.
Reinvesting dividends buys more shares. When the price rolls back overnight after a dividend payment, the number of shares does not roll back.
Look at the number of shares. You and I talk past each other because you define invested dollars differently.
The daily price fluctuations are simply noise. I watch the number of shares grow; that is an upward trend. Over a long enough time period, say 30-40 years, the chance of losing money overall is very low.
Here is an example of your fallacy.
But a 100% gain on 5% more shares is more money!
wrong wrong wrong
a 100% gain on 5% more shares starting at a price that was lowerd by 5% at the open is the same money !
watch closely >>>>
you have 100k and 100 shares of a stock and got a 5% dividend . so you have ex div 95k invested at the open after the roll back to start with , 5 k in pocket to reinvest and 100 shares still .
so you buy 5 shares and reinvest . you now open with 105 shares of stock worth 950 a share!!!!!!!!!!! that is the same 100k you had pre div . if it goes up 100% it is still the same 200k .
plus the 5k dividend you pocketed .
if you did not reinvest you would have 100 shares at 950 a share which is 95, 000 going up 100% , that is only 190k
Last edited by mathjak107; 11-23-2018 at 08:20 AM..
Actually, 5% less "invested" (your definition) due to rollback equals 5% more shares due to reinvestment which means the 100% gain creates the same amount of money either way. It is a wash.
yes you are wrong !!! , because while you have more shares , your value on those shares was reduced so you have more shares at a lower price as a starting point when it trades ex div again which merely equals what you had before it went ex div . if markets go up 100% it is 100% from that reduced opening price . got it! you have more shares but the same dollars going up 100%
look at my example , it is clear what is happening .
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