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Agree in theory, but expand it to world and you could say the top 10 countries control the other 200. But I like emerging and small cap stocks as well
Though in theory the s&p 500 is also a managed fund by those choosing the 500 on it.
Not that s&p 500 should be the "standard", forget where but the a report said the companies that get listed on there grows slower than they did prior to being on the list.
But the index fund or total market is as good as any for someone who has the least hands on, outside of a balanced fund or something
i have slyv , the s&p 600 small cap value etf . that thing is amazingly volatile . yesterday it had me down 11k at one point , then recovered to down about 4K at the close and up about 4k at the moment . it was up 32% last year so small caps can be wild .
but when combined with the rest of the portfolio things temper out to very little volatility thankfully . but that is why the model works the way it does .
A group of us were sitting around the Senior Center and the conversation turned to money.
Everyone was talking about their high dividend stocks and how great it was to get that extra income every quarter. I tried to tell them that the dividend was basically an accounting gimmick and it's benefit was more psychological than real.
Everyone around the table told me I was wrong. They said that a stock dividend was basically the same as interest on money in the bank, but generally paid quarterly vs monthly. How they saw it was the dividend per share was extra income paid by the company to the shareholders. A return of the company profits to shareholders.
I told them that that was only partially right. But it was not real additional income like interest on a bank account. I told them if they had $1000 in the bank and if the interest was 2% their bank balance would be $1020.00 after the interest was paid. But if they got a two percent dividend, the value of the stock would drop 2% the day of the dividend. The cost per share would go from-for example- from $1000 a share to $980.00 a share. If the dividend is reinvested in the stock, you now have more shares but each share is worth 2% less in this example, so at the end you have exactly the same amount of money. Unlike your bank account where you actually have two percent more due to the interest payment.
So the stock price drops 2% and stays down? For how long? What sets the price of the stock? Is it the net value of the assets minus the liabilities? Is it the book value? You write like the price of a stock is set like the net asset value of a mutual fund share.
the price of a stock and hence the percentage of gains or losses on a stock from where you bought it are set by greed , fear and perception ..
your account balance that the gains or losses act upon are based on your opening balance at any given time frame you want to use .
so if you had 100k and got a 5% dividend . exchange computers reduce your amount invested to 95k and 5k in pockets .
the markets then take over and greed , fear and perception drive your 95k up or down x-percentage whether you want to figure on the day , the quarter or the year is up to you ..
if you reinvest the dividend then markets act on your original 100k going up or down with the same market action . whatever that action is will be on 100k instead of just 95k if you reinvested the dividend ..
Last edited by mathjak107; 01-16-2017 at 12:54 PM..
So the stock price drops 2% and stays down? For how long? What sets the price of the stock? Is it the net value of the assets minus the liabilities? Is it the book value?
Good question. The 2% drop in price is imposed by the trading board (e.g., NASDAQ) on the opening day of the stock's ex-dividend date. The 2% is subtracted from the previous day's closing price. But of course that is just the opening price for trading and really means little as the market will set its own price once trading gets going. The ex-dividend date also affects any unfilled orders that were placed the previous day, in the same manner.
As to how long it stays down - that is determined by the market. It may float back up quickly, slowly, or not at all depending on what people think of the company.
By the time a month has gone by the stock price is completely unconnected to the automatic reduction.
wrong , because of the reasons i gave above . market action percentage wise will "always" be on less dollars than you had after the payout .
there is no other way that can play out .
if the dividend was reinvested the market action is on the exact same amount you had pre payout , if you don't reinvest it is less money being acted on by the markets .
think about it :if you pull 5k out of a 100k account regardless of how much markets act on the stock the action will be on only 95k .
a market that rises 10% on 95k will always be less that 10% on 100k
A group of us were sitting around the Senior Center and the conversation turned to money.
Everyone was talking about their high dividend stocks and how great it was to get that extra income every quarter. I tried to tell them that the dividend was basically an accounting gimmick and it's benefit was more psychological than real.
Everyone around the table told me I was wrong. They said that a stock dividend was basically the same as interest on money in the bank, but generally paid quarterly vs monthly. How they saw it was the dividend per share was extra income paid by the company to the shareholders. A return of the company profits to shareholders.
I told them that that was only partially right. But it was not real additional income like interest on a bank account. I told them if they had $1000 in the bank and if the interest was 2% their bank balance would be $1020.00 after the interest was paid. But if they got a two percent dividend, the value of the stock would drop 2% the day of the dividend. The cost per share would go from-for example- from $1000 a share to $980.00 a share. If the dividend is reinvested in the stock, you now have more shares but each share is worth 2% less in this example, so at the end you have exactly the same amount of money. Unlike your bank account where you actually have two percent more due to the interest payment.
I did tell them a dividend stock may have advantages because many people think it is like interest and having a dividend may show the company is doing well.
No matter how hard I tried to explain it, no one would believe me and I gave up. Included in this group, were men who had been investing in the stock market for years and years!
Actually why will the cost of the share go down if a dividend is paid? Isnt the cost or price of a share determined by how much the owner wants to sell, if they want to sell?
And if not for the dividend, what gives a share of a company its value? Can I walk from store to store hiring and firing people I randomly feel like because I am an owner? Do I get free goods from each store?
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