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I will probably never understand the psychology of why a forced profit distribution should be more motivating than clean capital growth.
When my overall portfolio has achieved its target return of 1.5%pM, I'm happy. That motivates me. 🤷
When my overall portfolio has achieved its target return of 1.5%pM, I'm happy. That motivates me. 🤷
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@Epi That's good for you. As different as people are, so different are the Quinnies.
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@Yield-Ahead Nothing against diversity, it's interesting and necessary for the markets. Nevertheless, I would like to understand the other side.
I would like to understand to what extent it can motivate me if a certain amount of my capital is regularly withdrawn from the stock and transferred back to me.
It is analogous to the case where I live in a house and every month someone comes, takes a brick from the house and gives it to me (and takes taxes for it). Is that a gift, a passive income, a motivation? 🤔
I would like to understand to what extent it can motivate me if a certain amount of my capital is regularly withdrawn from the stock and transferred back to me.
It is analogous to the case where I live in a house and every month someone comes, takes a brick from the house and gives it to me (and takes taxes for it). Is that a gift, a passive income, a motivation? 🤔
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There is no comparison: A house is a static structure - if you remove bricks, it inevitably becomes smaller and more unstable. Corporate profits are dynamic, variable variables. They can and should grow. I benefit when these profits increase sustainably and are distributed as dividends that grow over the long term. That is highly motivating and attractive for me and others.
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@Yield-Ahead Sure, you can compare the two. The statics of the house correspond to the profit growth of the dividend-paying companies.
Any removal of capital from a company in the form of dividends prevents this capital from being used to invest in future profit growth, thus making the house more unstable.
If it is convenient, a different picture: dividend payments literally bleed companies dry. Sometimes companies manage to survive and grow despite this bloodletting. Just as in the Middle Ages, sick children grew despite a high blood loss during bloodletting. But that was never helpful. And enjoying the fact that the companies to which I entrust my capital carry a heavy burden through me would make me feel guilty rather than motivated.
Do you understand my comprehension problem now?
Any removal of capital from a company in the form of dividends prevents this capital from being used to invest in future profit growth, thus making the house more unstable.
If it is convenient, a different picture: dividend payments literally bleed companies dry. Sometimes companies manage to survive and grow despite this bloodletting. Just as in the Middle Ages, sick children grew despite a high blood loss during bloodletting. But that was never helpful. And enjoying the fact that the companies to which I entrust my capital carry a heavy burden through me would make me feel guilty rather than motivated.
Do you understand my comprehension problem now?
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No, I don't understand. I've been around GQ for a few years now. I mean you've discussed Divi cons vs pros (passionately) several times. Everything may have already been said, just not by everyone. Since I don't know you, I don't want to imply anything. But perhaps it's not a question of being able to understand, but a question of wanting to understand. Generations of dividend and income investors are not stupid and know what they are doing and why they are doing it. Thousands of companies also know exactly why they pay out their profits instead of not. Like I said. I don't want to insinuate anything. That's not my place.
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@Yield-Ahead You're right, the discussion pro versus con dividends has been held many times.
However, and I think this is a pity, the pro-divs usually break off the discussions before they have explained their position. Usually, they first present the psychological effect of their position, then their position when asked - but never the explanation of their position. How am I supposed to understand anything?
And the reference to all the people and companies that rely on distributions unfortunately explains nothing. Because their behavior is exactly what I don't understand.
To be more specific: The investment legend Buffett himself deliberately refrains from distributions at his $BRK.B because he sees them as detrimental to investors. So does Buffett have no idea or what would you accuse him of?
However, and I think this is a pity, the pro-divs usually break off the discussions before they have explained their position. Usually, they first present the psychological effect of their position, then their position when asked - but never the explanation of their position. How am I supposed to understand anything?
And the reference to all the people and companies that rely on distributions unfortunately explains nothing. Because their behavior is exactly what I don't understand.
To be more specific: The investment legend Buffett himself deliberately refrains from distributions at his $BRK.B because he sees them as detrimental to investors. So does Buffett have no idea or what would you accuse him of?
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@Epi With your analytical and logical approach, you will most likely not come to the desired conclusion. By the way, the dividend king Coca Cola is a significant position in the Berkshire portfolio, but let's not go there... 😀
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@Yield-Ahead Too bad.
Then I'll just keep waiting for a prodiv who is prepared to explain dividend investing to me in an analytical and logical way.
Thanks anyway!
Then I'll just keep waiting for a prodiv who is prepared to explain dividend investing to me in an analytical and logical way.
Thanks anyway!
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@Epi @Yield-Ahead Interesting discussion. I myself understand both positions, but have since switched to the dividend camp. Why? Because I would like to generate a passive source of money in about 8-10 years without (if possible) selling the securities myself. I would then like to leave them to the next generation. That is my (simple) motivation, perhaps not the best choice economically, but for me the most convincing 😉
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•@Novius That is also a good and understandable reason.
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