Independent Financial Advice

Did you know that from 1965 through 1981, the DOW fell by 10%?  That’s 16 years – half a working lifetime or an entire retirement for many of us.  Remember the lessons of history.  Stocks can and do go down for long periods of time.  That is why you must include fixed-income as a counterbalance.  It is also why you want to own dividend-paying stocks in your portfolio and want to concentrate on companies that tend to increase dividends year after year.

Over a single year, equities are so volatile that most of an investor's performance is attributable to share price appreciation or depreciation.  Dividend income adds only a modest amount to each year's gain or loss.  While year-to-year performance is driven by capital gains, long-term returns are heavily influenced by reinvested dividends.  Consider that an equity portfolio of $1 invested from 1900-2000 that paid out all of its dividend income still grew to $198.  However, by simply reinvesting all of its dividend income, the portfolio would have grown to $16,797 or 85 times larger!

To learn more, you may find it helpful to read our other articles about the traits of successful investors, how investor behavior is a key determinant to long term results or thinking outside the style box.  If you have specific questions about your current portfolio or retirement planning, please contact us for a complimentary consultation.  You can also learn of new articles if you Subscribe to Independent Financial Advice by Email