07-10-2021, 01:19 AM
People say that they live on the stock dividends and don't touch the principal--- re
<!-- SC_OFF --><div class="md"><p>On nearly every investment board on the Internet are tons of people who swear that they have the perfect plan for a guaranteed funded retirement. Here is their foolproof plan:</p> <p><strong>They live on the stock dividends and don't touch the principal.</strong></p> <p>Is this genius or just ill-informed? I vote ill-informed because if you spend the dividends paid by the stock investments you are in fact spending the principal. People assume that stock dividends are like bank interest where you are getting extra money every month/quarter above and beyond the value of your portfolio. This is wrong! Stock dividends are not like getting bank account interest.</p> <p><strong>When a dividend is paid, the cash paid to each shareholder is deducted from the cash held by the company. This reduces the book value of the company when it pays you a dividend. Therefore, the value of the company is reduced every time it pays a dividend. In addition, when a dividend is paid, the stock price of the company is automatically adjusted by the stock market by the amount of the dividend. Therefore, in our example, if the company pays a $1.00/share dividend, then the stock price would automatically adjust from $100/share to $99/share after the dividend is paid. The same would drop would occur in the book value of the company.</strong> </p> <p>So when you withdraw the dividend payment from your account and spend it, the value of your portfolio is down the same as if you did a scheduled withdrawal of the same percentage as the dividend payment.</p> <p>Check this out for more information:</p> <p><a href="https://www.diyinvesting.org/dividends-free-money/">https://www.diyinvesting.org/dividends-free-money/</a></p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/rarelywearamask"> /u/rarelywearamask </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/ogsg45/people_say_that_they_live_on_the_stock_dividends/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/ogsg45/people_say_that_they_live_on_the_stock_dividends/">[comments]</a></span>Kind Regards R
<!-- SC_OFF --><div class="md"><p>On nearly every investment board on the Internet are tons of people who swear that they have the perfect plan for a guaranteed funded retirement. Here is their foolproof plan:</p> <p><strong>They live on the stock dividends and don't touch the principal.</strong></p> <p>Is this genius or just ill-informed? I vote ill-informed because if you spend the dividends paid by the stock investments you are in fact spending the principal. People assume that stock dividends are like bank interest where you are getting extra money every month/quarter above and beyond the value of your portfolio. This is wrong! Stock dividends are not like getting bank account interest.</p> <p><strong>When a dividend is paid, the cash paid to each shareholder is deducted from the cash held by the company. This reduces the book value of the company when it pays you a dividend. Therefore, the value of the company is reduced every time it pays a dividend. In addition, when a dividend is paid, the stock price of the company is automatically adjusted by the stock market by the amount of the dividend. Therefore, in our example, if the company pays a $1.00/share dividend, then the stock price would automatically adjust from $100/share to $99/share after the dividend is paid. The same would drop would occur in the book value of the company.</strong> </p> <p>So when you withdraw the dividend payment from your account and spend it, the value of your portfolio is down the same as if you did a scheduled withdrawal of the same percentage as the dividend payment.</p> <p>Check this out for more information:</p> <p><a href="https://www.diyinvesting.org/dividends-free-money/">https://www.diyinvesting.org/dividends-free-money/</a></p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/rarelywearamask"> /u/rarelywearamask </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/ogsg45/people_say_that_they_live_on_the_stock_dividends/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/ogsg45/people_say_that_they_live_on_the_stock_dividends/">[comments]</a></span>Kind Regards R