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You're right about Divs...

By: StudioCity'98

This year is likely to be one where Total Return [CapGain + Divs] is greater than straight Cap Gains alone.  Dividends, when reinvested over time, is a very serious wealth builder.

Everyone should have some significant fraction of one's portfolio invested in Dividend Shares & Dividend Growth Shares.  When reinvested over time the Cost Basis goes down relative to the capital asset. Then at some point in the future, say during one's retirement years, instead of reinvesting the Div payment one simply takes them as part of one's retirement cash flow.

Imagine for each $1MM of an invested capital asset one receives $70K- $95K per/yr in Div income. And that income is taxed at only 15%.  Pretty sweet deal.

i.e. $5MM portfolio spinning off $350K - $475K of yearly income taxed at 15%, and not eating into the Capital Base  --> Not half bad. And further assuming that Share Market drifts higher over time, historically at 7%, one's Capital Base continues to rise each year which equates to spinning off even more Dividend Income each year ---->  The way that rich people get richer. 

Over the years when advising clients I've found that too many people attempt to take too much risk with each trade, or each investment rather than taking less relative risk in the short and letting the Magic of Compound Interest do its thing over the longer term building big-time wealth.

Training or coaching clients in this type of Behavioral Finance is where the best Advisors earns their compensation.  This coupled with proper Tax Planning and/or expertise in Alternative Investments [Real Estate, Option Overlays, Managed Futures, access to Private Equity & PIPE's...etc],  Pension & Retirement Planning, are areas where the best Advisors and their clients prosper.


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