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The Stock Market Takes Another Dive - Steer Clear ?
Comments
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Dividend re-investment is incredibly easy, it's not some sort of black magic that only arcane masters can benefit from. For example my own portfolio consist exclusively of accumulation funds so all my dividend income is automatically re-invested with absolutely no effort on my part.
Total return is the be all and end all.
Capital growth is the resultant of total return. By the way, automatic reinvestment of dividend income is not necessarily the best way to reinvest them.0 -
Inflation is just a decline in the value of a specific currency. The default expectation for non-cash assets is that they hold their real value. The currency value has to go up in line with inflation just to stand still.I don't know why you keep banging on about the 'capital value', since nobody has claimed that the capital value is supposed to keep up with inflation
If shares are declining in real value and you're having to look at dividends to make up the difference, this implies that companies are effectively paying income out of capital. This is not good. If a company is failing to maintain its capital value in real terms, this suggests that the market expects future profits and dividends to fall away."It will take, five, 10, 15 years to get back to where we need to be. But it's no longer the individual banks that are in the wrong, it's the banking industry as a whole." - Steven Cooper, head of personal and business banking at Barclays, talking to Martin Lewis0 -
Whatever the long term prospects, if the stock is likely to be cheaper before it's dearer then it's not the right time for a Buy recommendation.The industry is very short term focussed, and sometimes misprices stocks that over the long term have very high chances of success.
Why is the industry wrong to be short-term focussed?
There is a trade-off on offer - less time and effort in return for inferior results. This would favour a long-term view. But that doesn't mean there are underpriced stocks out there waiting to be picked."It will take, five, 10, 15 years to get back to where we need to be. But it's no longer the individual banks that are in the wrong, it's the banking industry as a whole." - Steven Cooper, head of personal and business banking at Barclays, talking to Martin Lewis0 -
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I don't reinvest dividends, I like to have them:o
Suppose I am just relying on capital growth for the future.
I have probably got it completely wrong.Stopped smoking 27/12/2007, but could start again at any time :eek:0 -
Capital growth is the resultant of total return.
No, total return is the resultant of capital growth and income.I don't reinvest dividends, I like to have them:o
Suppose I am just relying on capital growth for the future.
I have probably got it completely wrong.
There's nothing wrong with taking the dividend income and spending it if that's what you want to do, but if your goal is to maximise the value of your investment over time you should ideally re-invest all income.0 -
No, total return is the resultant of capital growth and income.
There's nothing wrong with taking the dividend income and spending it if that's what you want to do, but if your goal is to maximise the value of your investment over time you should ideally re-invest all income.
So would you rather have capital growth or a total return of zero. By the way, total return is tangible. It refers to proceeds from the disposal of an investment expressed as a % of the original investment, not some figure on a piece of paper.0 -
Surely the disposal figure is just the capital value and doesn't include dividends that were paid out over the holding period. As such, it can't represent total return.So would you rather have capital growth or a total return of zero. By the way, total return is tangible. It refers to proceeds from the disposal of an investment expressed as a % of the original investment, not some figure on a piece of paper.
If it was an accumulation unit or a non-income-producing asset, then the two would be the same, but otherwise the disposal value less acquisition cost is the capital gain alone.I am a Chartered Financial Planner
Anything I say on the forum is for discussion purposes only and should not be construed as personal financial advice. It is vitally important to do your own research before acting on information gathered from any users on this forum.0 -
Going back to the original post, I left investing the last £5k of my ISA until the eleventh hour. Seeing the market dip I took advantage of HL's Stocks and Shares ISA temporary cash holding option at 3% interest. I'll leave it as cash for now and look for one of the many buying opportunities increasingly now out there.
Volatility does have it's benefits. Although 5900 down to 5650 is nowhere near last years trough. Last year I bought ETFs trackers at c. 5100 and sold at c. 5900. Gauging the bottom is practically impossible as I bought some at 5400, thinking that was the bottom, but they are still showing a profit.
I wouldn't "gamble" my whole portfolio on short-term volatility. My main ISA (and PEP's before) investment I've hung onto through thick and thin is Invesco Perpetual High Income Accumulation where gains with income reinvested over the last 15-20 years are into triple percentage points (even after active managed fund fees).
http://adviser.invescoperpetual.co.uk/UK/onshoreliterature/Importance_of_dividends_High_Income_Fund.pdfIf the ball had gone in the net it would have been a goal.If my Auntie had been a man she'd have been my Uncle.0 -
If shares are declining in real value and you're having to look at dividends to make up the difference, this implies that companies are effectively paying income out of capital. This is not good. If a company is failing to maintain its capital value in real terms, this suggests that the market expects future profits and dividends to fall away.
You're assuming that the market price reflects the true value of a company. I think its common consensus now that during the dotcom the markets got wildly over valued. So even though the earnings of companies have grown, and may have beat inflation, if the stock is priced too highly the shareholders dont benefit from that.Whatever the long term prospects, if the stock is likely to be cheaper before it's dearer then it's not the right time for a Buy recommendation.
Why is the industry wrong to be short-term focussed?
There is a trade-off on offer - less time and effort in return for inferior results. This would favour a long-term view. But that doesn't mean there are underpriced stocks out there waiting to be picked.
You cant know if a stock will be cheaper in a few weeks, you have to make a decision to buy or sell based on the business, not what you think the market will do. Most of the most famous investors have treated investing like this. If the price drops you either buy more or wait.
Being short term focused and putting more effort in doesnt lead to higher returns. If that were true then you would have at least a few managed funds giving spectacular returns, and people like Warren Buffett wouldnt be one of the richest men on earth.Faith, hope, charity, these three; but the greatest of these is charity.0
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