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they add nothing to the pie , they only take away if you do not invest them .
not investing dividends has less money compounding for you then you had prior to the dividend .
if you had 10k invested before the payout and you didn't reinvest then at the opening bell for the next quarter you would hve that much less compounding.
stocks with rising dividends tend to do well but it isn't because of reinvesting the dividend. the rising dividend is a vote of confidence for the stock making it more attractive .
When people are trading based on fear or greed, what if they have bigger impacts on these companies than they are "supposed" to have? What if the period of time when their effects on the companies noted, are extended longer than usual?
In the short term, they can and do - which is why stocks should ALWAYS be considered long-term investments. You've probably heard of the saying "the market can stay irrational longer than you can stay solvent."
The saving factor, though is that Fear and Greed are counter-balancing forces. Fear may prompt people to sell, but when the share price of an otherwise sound company falls low enough, the desire to make money tempts others to buy - why pass up a bargain? (In late 2007, lots of great companies were 30-50% off, talk about a sale!) And the reverse is also true; when prudent investors see that the share prices of a company simply can't be explained rationally by the company's overall performance, they sell while they can rather than ride the bubble to the top and take a bath when it pops.
That's why in the sort term, the market can be so volatile, and why money needed within 10-15 years should never be invested in the stock market. You've got to be able to ride out the irrational swings (both up and down) in order to profit from the long-term growth potential. Unfortunately a lot of people don't do that; they day-trade and/or listen to their gut (which is almost always a mistake) and as a result they buy low and sell high. That's why so many people are afraid of stocks.
In the short term, they can and do - which is why stocks should ALWAYS be considered long-term investments. You've probably heard of the saying "the market can stay irrational longer than you can stay solvent."
The saving factor, though is that Fear and Greed are counter-balancing forces. Fear may prompt people to sell, but when the share price of an otherwise sound company falls low enough, the desire to make money tempts others to buy - why pass up a bargain? (In late 2007, lots of great companies were 30-50% off, talk about a sale!) And the reverse is also true; when prudent investors see that the share prices of a company simply can't be explained rationally by the company's overall performance, they sell while they can rather than ride the bubble to the top and take a bath when it pops.
That's why in the sort term, the market can be so volatile, and why money needed within 10-15 years should never be invested in the stock market. You've got to be able to ride out the irrational swings (both up and down) in order to profit from the long-term growth potential. Unfortunately a lot of people don't do that; they day-trade and/or listen to their gut (which is almost always a mistake) and as a result they buy low and sell high. That's why so many people are afraid of stocks.
buying stocks are no different than buying any business , it just has a few more parameters baked in to it.
all quarter analysts and investors are trying to guess whether profits and revenue targets will be met . if they are then the stock goes no where . but if when those secret earning's numbers are released there is an upside surprise or down side surprise then the stock moves up or down.
all quarter investors try to analyze the incoming information about that company and instantly the price reacts. that is why if the stock matches earnings there is little change .
over time you want to own company's with increased earnings , the same as any other business.
but you also want that company to add share holder value so stock buy backs become part of the equation too.
there are all sorts of things public company's can do as i listed above to compound returns over time on investor money .
I see this calculation using a compound interest calculator, is that how you would calculate the price of the fund though?
Okay, well then can someone tell me then how is this fund's price going to $1,300 within 30 years please
As a practical matter, no. Funds pass on dividends and capital gains (capital gains usually once a year, dividends usually quarterly). When those distributions get passed on, they reduce the share price, but you can opt to have them automatically reinvested.
In the short term, they can and do - which is why stocks should ALWAYS be considered long-term investments. You've probably heard of the saying "the market can stay irrational longer than you can stay solvent."
The saving factor, though is that Fear and Greed are counter-balancing forces. Fear may prompt people to sell, but when the share price of an otherwise sound company falls low enough, the desire to make money tempts others to buy - why pass up a bargain? (In late 2007, lots of great companies were 30-50% off, talk about a sale!) And the reverse is also true; when prudent investors see that the share prices of a company simply can't be explained rationally by the company's overall performance, they sell while they can rather than ride the bubble to the top and take a bath when it pops.
That's why in the sort term, the market can be so volatile, and why money needed within 10-15 years should never be invested in the stock market. You've got to be able to ride out the irrational swings (both up and down) in order to profit from the long-term growth potential. Unfortunately a lot of people don't do that; they day-trade and/or listen to their gut (which is almost always a mistake) and as a result they buy low and sell high. That's why so many people are afraid of stocks.
Minor quibble here: But it was late 2008 that companies were selling at a 30%-50% discount.
As a practical matter, no. Funds pass on dividends and capital gains (capital gains usually once a year, dividends usually quarterly). When those distributions get passed on, they reduce the share price, but you can opt to have them automatically reinvested.
the returns are compounded returns yearly . whether or not there is a dividend paid is a moot point as long as it is reinvested . it is the rise in share price that compounds each year .
In the short term, they can and do - which is why stocks should ALWAYS be considered long-term investments. You've probably heard of the saying "the market can stay irrational longer than you can stay solvent."
The saving factor, though is that Fear and Greed are counter-balancing forces. Fear may prompt people to sell, but when the share price of an otherwise sound company falls low enough, the desire to make money tempts others to buy - why pass up a bargain? (In late 2007, lots of great companies were 30-50% off, talk about a sale!) And the reverse is also true; when prudent investors see that the share prices of a company simply can't be explained rationally by the company's overall performance, they sell while they can rather than ride the bubble to the top and take a bath when it pops.
That's why in the sort term, the market can be so volatile, and why money needed within 10-15 years should never be invested in the stock market. You've got to be able to ride out the irrational swings (both up and down) in order to profit from the long-term growth potential. Unfortunately a lot of people don't do that; they day-trade and/or listen to their gut (which is almost always a mistake) and as a result they buy low and sell high. That's why so many people are afraid of stocks.
Aredhel,
Thanks for the explanation and again, I appreciate you actually discussing this with me than doing the personal attacks that others have been doing here as if "the decision to invest in stocks" is as easy a decision to get up and pour yourself a glass of water.
I read through your responses twice, I also went back and read over just about everything MathJak has been saying since I started debating this almost a year ago now.
As of today, I'm going to have to pass on investing in Stocks and here are my reasons which are still unanswered which still leave large clouds of uncertainty over this area (and I don't invest in what I don't understand):
- Aredhel you say that the growth of Stocks are indeed tied to the growth of the economy in particular as well as the companies within the portfolio. There are other Stock gurus that say this is false, and that, to quote, "The Stock Market is Not The Economy". So who is right, YOU or THEM? They say that with Stocks you aren't really investing in the underlying companies, you are investing in the perception of the paper certificate that other traders have on the market, making the situation a pure supply/demand event. So who is right, YOU or THEM? I have no clue.
- Aredhel this Investment Community on City Data as well as others on the Internet, are speaking out of two sides of their mouth. One minute, as a fixed income "saver", you are blasted all day by these people as being stupid (and yes, they use that terminology) for investing in Long Term CDs and not investing in Stocks, which is to say that if you are earning 3% with the CD then you are "stupid" because you could be earning 7% with the Stock, correct? But then when you turn around and ask them, what do THEY predict the Stock Fund in particular will grow to over the next 20 - 30 years, they strictly state, "I don't know because nothing is guaranteed and I can't predict returns." Why on one hand are they certain that I'm STUPID for not being in the Market, but on the other hand, they can't tell me how much MORE I will make being in the market than being out of it?
- The theories in regards to Stock Investing seem to keep changing every decade. There was a time when Index Funds were not as Popular, now everybody swears by them. There was a time when Mutual Funds were all the rave, now nobody likes them.
- Aredhel you confirmed that things UNRELATED to the financial fundamentals of the company, such as the News Media blasting a CEO for cheating on his wife, can cause the stocks to go down in the short run. You recommend just to keep holding them for the long run as they will eventually "go back up". Again, how do you KNOW they are going to "go back up" and why in the hell does the value of the Stock have to decrease based on something totally UNRELATED to the financial fundamentals of the company? What if something else unrelated pops up and does the same thing? Aredhel YOU SAID the appreciation of the Stock is tied to the fundamentals of the finances of the company and the Economy, but then how does a CEO cheating on his wife cause the stock to go down? How can the News Media make the stock go down Aredhel? You see how this is damn confusing?
I will continue to be called names, called stupid, and made fun of by the Investment Community, and that's fine. But it's my life. Nobody here is going to "eat losses" that I have nor "eat gains" that I have, it's all on ME.
I flat out, DO NOT UNDERSTAND the Stock Market. And I never will. And I will NEVER invest in it. That's my decision, but Aredhel like I said, I thank you for actually having a conversation with me about this that was decent. I'm sure The MathJak Team are going to respond with their usual "I'm so stupid" comments, but that's fine. I will continue to bust my tail off in my Career, live below my means, and invest my savings in Long Term CDs at 3% - 3.5% guaranteed with FDIC Insurance. If according to you guys my plan is "stupid" and I will run out of money in retirement, then so be it, hell I might not even LIVE to see retirement.
No one would think your stupid for listening to your pucker factor or not investing in what you don't understand.
We only object with you arguing with those who do understand and telling us we are stupid for not listening to you.
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