In theory, I can understand the effect very well. However, is it possible to prove or implement this in reality?
If I have a company that does not pay a dividend, how can I compare whether it achieves the same return with partial sales?
It plays a role how high my partial sale is, which I realize and above all the timing when I carry it out regularly.
I am currently asking myself this question all the time.
If I have a company that does not pay a dividend, how can I compare whether it achieves the same return with partial sales?
It plays a role how high my partial sale is, which I realize and above all the timing when I carry it out regularly.
I am currently asking myself this question all the time.
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Basic assumptions
1. distributing ETF:
- Dividend is distributed on January 1.
- Dividend yield: 2% of the ETF value (price at the time of distribution: € 100 per unit).
- Dividend amount: € 2 per unit.
2nd accumulating ETF:
- Price on January 1: €100 (dividends are reinvested and increase the price).
- On February 1, you sell a share in the amount of the dividend to simulate the distribution.
3. price performance of the ETF:
- The ETF rises by 3% to € 103 in January.
- In February, it falls by 2% to € 100.94.
Calculation
1. distributing ETF (dividend is paid out):
- On January 1, you receive a dividend of €2 per share.
- Your share retains a price of €100, but you have €2 in dividends as cash.
Your total value:
- €100 (ETF share) + €2 (dividend) = €102.
2nd Accumulating ETF (partial sale in February):
- On January 1, the price rises to € 103 due to the reinvested dividend.
- On February 1, the price falls by 2% to € 100.94.
Now you sell a share worth €2:
- You sell € 2 ÷ € 100.94 ≈ 0.0198 shares.
- Remaining shares: 1 - 0.0198 ≈ 0.9802.
Your total value after the partial sale:
- Value of the remaining shares: 0.9802 × €100.94 ≈ €98.86.
- Cash on hand: € 2.
Total value:
- 98.86 € (remaining shares) + 2 € (cash on hand) = 100.86 €.
Result of the timing effect
- Distributing ETF: € 102.
- Accumulating ETF (with partial sale): 100,86 €.
Loss due to timing effect:
- 102 € - 100.86 € = 1.14 € per unit.
Reasons for the loss
1. price change: The price of the accumulating ETF changed from January to February (in this case negatively).
2. partial sale influences the residual return: As you sell units, the proportion that benefits from future compound interest is reduced.
If the price had continued to rise in February instead, the timing effect might have resulted in less loss or even a small gain. The effect therefore depends heavily on the share price performance.
Let me summarize my example from ChatGPT.
So of course it is plausible in both directions.
1. distributing ETF:
- Dividend is distributed on January 1.
- Dividend yield: 2% of the ETF value (price at the time of distribution: € 100 per unit).
- Dividend amount: € 2 per unit.
2nd accumulating ETF:
- Price on January 1: €100 (dividends are reinvested and increase the price).
- On February 1, you sell a share in the amount of the dividend to simulate the distribution.
3. price performance of the ETF:
- The ETF rises by 3% to € 103 in January.
- In February, it falls by 2% to € 100.94.
Calculation
1. distributing ETF (dividend is paid out):
- On January 1, you receive a dividend of €2 per share.
- Your share retains a price of €100, but you have €2 in dividends as cash.
Your total value:
- €100 (ETF share) + €2 (dividend) = €102.
2nd Accumulating ETF (partial sale in February):
- On January 1, the price rises to € 103 due to the reinvested dividend.
- On February 1, the price falls by 2% to € 100.94.
Now you sell a share worth €2:
- You sell € 2 ÷ € 100.94 ≈ 0.0198 shares.
- Remaining shares: 1 - 0.0198 ≈ 0.9802.
Your total value after the partial sale:
- Value of the remaining shares: 0.9802 × €100.94 ≈ €98.86.
- Cash on hand: € 2.
Total value:
- 98.86 € (remaining shares) + 2 € (cash on hand) = 100.86 €.
Result of the timing effect
- Distributing ETF: € 102.
- Accumulating ETF (with partial sale): 100,86 €.
Loss due to timing effect:
- 102 € - 100.86 € = 1.14 € per unit.
Reasons for the loss
1. price change: The price of the accumulating ETF changed from January to February (in this case negatively).
2. partial sale influences the residual return: As you sell units, the proportion that benefits from future compound interest is reduced.
If the price had continued to rise in February instead, the timing effect might have resulted in less loss or even a small gain. The effect therefore depends heavily on the share price performance.
Let me summarize my example from ChatGPT.
So of course it is plausible in both directions.
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@Iudicium Total return.
Dividend payout in % plus share price growth in % over one year. If the growth over the year plus the dividend in % is greater than the growth in % of the non-dividend-paying company, then the dividend stock is better.
As the dividend directly influences the share price, this should be the best option. Here too, the longer the growth remains stable or increases, the better. The approach of divgrowth to take shares that can increase the dividend in a stable manner is not directly wrong, but only one half.
Dividend payout in % plus share price growth in % over one year. If the growth over the year plus the dividend in % is greater than the growth in % of the non-dividend-paying company, then the dividend stock is better.
As the dividend directly influences the share price, this should be the best option. Here too, the longer the growth remains stable or increases, the better. The approach of divgrowth to take shares that can increase the dividend in a stable manner is not directly wrong, but only one half.
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@Iudicium You don't increase the share price by reinvesting. That would be nice.
You just have more shares that are worth less overall. The bottom line is a zero-sum game minus tax, trading costs and spread.
That's why compound interest is wrong.
You don't magically have more money after dividends and paying in again.
You just have more shares that are worth less overall. The bottom line is a zero-sum game minus tax, trading costs and spread.
That's why compound interest is wrong.
You don't magically have more money after dividends and paying in again.
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So in reality it also depends on how the market behaves?
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@Iudicium I think your calculation example was wrong. You do not simply increase the market value of the entire share by reinvesting a dividend. That would be nice if you could simply increase the shares with the dividends you reinvest without losing the market value.
Whenever you do the math and suddenly a perpetuum of money comes out for no reason, you should ask yourself if you're not mistaken
Whenever you do the math and suddenly a perpetuum of money comes out for no reason, you should ask yourself if you're not mistaken
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The example is not about reinvesting. Chatgpt has only calculated the sum of the two. So from dividend and share value and in the other example from share value and partial sale
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@Iudicium No, chatgpt has not. Otherwise the market value after dividends would be 98. Reinvesting does not increase the market value back to 100.
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I think it should be right now
Just as I meant it.
You are absolutely right, the price loss of 2% naturally also affects the distributing ETF. As a result, the price on 01.02. has also fallen. I will adjust the calculation again and take into account that the price loss of 2% is applied to the new price value after the distribution. Thank you for pointing this out, let's correct it:
Correct calculation with price loss for both ETFs
Assumptions:
- Distributing ETF:
- Price on 01.01.: € 100.
- Dividend: € 2 → Share price falls to € 98.
- Price loss of 2% to € 98 on 01.02. → New price: € 98 × 0.98 = € 96.04.
- Accumulating ETF:
- Price on 01.01.: € 100.
- No distribution, dividend is reinvested internally.
- Price loss of 2% on 01.02. → New price: € 100 × 0.98 = € 98.
- Partial sale worth € 2 takes place on 01.02.
Calculation of the values
1. distributing ETF
- Price on 01.02.: € 96.04.
- Cash balance (dividend): € 2.
Total value:
- ETF value: € 96.04.
- Cash on hand: € 2.
- Total: € 96.04 + € 2 = € 98.04.
2. accumulating ETF with partial sale
- Price on 01.02.: € 98.
- Sale of € 2 ÷ € 98 ≈ 0.02041 units.
- Remaining units: 1 - 0.02041 ≈ 0.97959 units.
- Value of the remaining shares: 0.97959 × € 98 ≈ € 95.02.
- Cash balance: € 2.
Total value:
- € 95.02 (shares) + € 2 (cash on hand) = € 97.02.
Comparison of returns
- Distributing ETF: € 98.04.
- Accumulating ETF: € 97.02.
Loss due to timing effect:
- € 98.04 - € 97.02 = € 1.02 per share.
Conclusion
- Why is the value of the accumulating ETF lower?
- The timing effect arises because you sell units at the lower price (after the price loss of 2%) in order to simulate the distribution. This reduces the basis for future increases in value to a greater extent.
- With a distributing ETF, the dividend is maintained regardless of price changes, which makes the loss less significant.
- The timing effect is particularly noticeable in the event of a negative share price performance. If the price were to rise, the accumulating ETF could even have a slight advantage due to the partial sale.
Just as I meant it.
You are absolutely right, the price loss of 2% naturally also affects the distributing ETF. As a result, the price on 01.02. has also fallen. I will adjust the calculation again and take into account that the price loss of 2% is applied to the new price value after the distribution. Thank you for pointing this out, let's correct it:
Correct calculation with price loss for both ETFs
Assumptions:
- Distributing ETF:
- Price on 01.01.: € 100.
- Dividend: € 2 → Share price falls to € 98.
- Price loss of 2% to € 98 on 01.02. → New price: € 98 × 0.98 = € 96.04.
- Accumulating ETF:
- Price on 01.01.: € 100.
- No distribution, dividend is reinvested internally.
- Price loss of 2% on 01.02. → New price: € 100 × 0.98 = € 98.
- Partial sale worth € 2 takes place on 01.02.
Calculation of the values
1. distributing ETF
- Price on 01.02.: € 96.04.
- Cash balance (dividend): € 2.
Total value:
- ETF value: € 96.04.
- Cash on hand: € 2.
- Total: € 96.04 + € 2 = € 98.04.
2. accumulating ETF with partial sale
- Price on 01.02.: € 98.
- Sale of € 2 ÷ € 98 ≈ 0.02041 units.
- Remaining units: 1 - 0.02041 ≈ 0.97959 units.
- Value of the remaining shares: 0.97959 × € 98 ≈ € 95.02.
- Cash balance: € 2.
Total value:
- € 95.02 (shares) + € 2 (cash on hand) = € 97.02.
Comparison of returns
- Distributing ETF: € 98.04.
- Accumulating ETF: € 97.02.
Loss due to timing effect:
- € 98.04 - € 97.02 = € 1.02 per share.
Conclusion
- Why is the value of the accumulating ETF lower?
- The timing effect arises because you sell units at the lower price (after the price loss of 2%) in order to simulate the distribution. This reduces the basis for future increases in value to a greater extent.
- With a distributing ETF, the dividend is maintained regardless of price changes, which makes the loss less significant.
- The timing effect is particularly noticeable in the event of a negative share price performance. If the price were to rise, the accumulating ETF could even have a slight advantage due to the partial sale.
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@Iudicium Yes, well chatgpt makes nonsense.
You have a rate of one hundred on 01.02. and withdraw 2 euros both times. Residual value 98 euros. Then it falls by 2%.
However, chatgpt only calculates minus 2 euros for the partial sale after the price loss. So once before (in the dividend calculation) and once after the price loss (in the partial sale). Of course there is a difference if you sell at different times. Or the dividend is paid out. The difference results from the deduction of 2% once at 100 and once at 98 euros.
That's kind of trivial now. And has nothing to do with the dividend or a partial sale. So much for the intelligence of AI
You have a rate of one hundred on 01.02. and withdraw 2 euros both times. Residual value 98 euros. Then it falls by 2%.
However, chatgpt only calculates minus 2 euros for the partial sale after the price loss. So once before (in the dividend calculation) and once after the price loss (in the partial sale). Of course there is a difference if you sell at different times. Or the dividend is paid out. The difference results from the deduction of 2% once at 100 and once at 98 euros.
That's kind of trivial now. And has nothing to do with the dividend or a partial sale. So much for the intelligence of AI
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Yes, that was my question/statement, that it is crucial when partial sales happen. That's what I was getting at.
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