Is the stock market trying to play nice today?

Don M. said:
My IRA posted the year end dividends today, and it was a nice year end "bonus". I think it was just about this time last year when the markets tanked and it took weeks/months to recover. I keep watching for another "correction", which appears to be quite overdue, and I wonder how long this market can keep advancing. When, not if, the next downturn arrives, I suspect it will be quite severe.
Click to expand...
again , it is not a bonus ... they give you a dollar in shares and take back a dollar in value , unless it is interest in a bond mutual fund . it is a wash , by sec law. if it worked any other way we would just buy a fund or stock on the record date and sell it after the ex div date and never own it and get free money .

in a taxable account you never want to buy before a dividend just for that reason .. you gain nothing but get a tax bill for the dividend … you wait until it goes ex div . you get the same number of shares for the same dollars invested but no tax bill yet .

these reductions in value may not be apparent because once the fund starts trading again it gets mixed in to the days rise or fall .

but if you did not reinvest the money that days gain would be on less dollars since you started out lower in value . if you do reinvest , they simply buy you an equal value in shares but since the shares are at a reduced price you get more shares but at the same dollars invested as you had .

so the days action is on the reduced starting value or the same value if you plow the money back in .

i don't know why this is so misunderstood by so many and they think it is free money from heaven that just gets sprinkled by unicorns .

no , it is the refund of money you already had in the investment and once it is paid out the share price must reflect that difference by being lowered by the same amount .....ALWAYS!!!!!!!!!
 

Last edited:
Mathjak, one thing you should consider about dividend stocks. They are often, like myself, bought by people who hold them for many years. So for each dividend per share dollar amount paid we get that amount for all the shares we have, some bought years ago and others at various times and at different prices. There can be a big difference in what we paid for a stock 10 or 20 years ago and the current price. So much so that the drop in price due to the current dividend payout may have little effect on us. We get the same amount per share whether we paid $2 or $20 per share.
 
all that matters is the amount of dollars acted on and the TOTAL RETURN ON THOSE dollars . number of shares is irrelevant .

here is where your thinking is wrong .

at any point in time , any time there is a dividend there is a drop in investment value by an equal amount .

lets say that 10k you put in 30 years ago is now 100k today as an example ... if the payout is a 10% dividend , to pick a number , then you will have 10k in hand and 90k working for you left after the mandatory reduction . if markets go up 100% the next year you have 180k being compounded on . and that 10k payout ,so for that year you have 10k in hand and 180k going on at years end .





if you reinvested that 10k dividend instead , it would buy more shares because the 10k is purchasing the shares at a lower price after the reduction so you would have more shares but the same 10k is going back in that came out equaling the same 100k you had originally . if markets went up 100% you have 200k compounding for you going forward

had that stock never payed out that dividend you would still have 100k since there is no reduction to offset a payout and it is the same 100k going up 100% or 200k being compounded on going forward …. your 200k would be made up of less shares since there was no reductions in price along the way and no buying back equal dollars in shares .

this is an extremely important concept , as this is where every ones thinking gets skewed

it is only about dollars invested x total return . it has nothing to do with how many shares make up the dollars invested ..

IF THE TOTAL RETURN IS THE SAME OR GREATER , WHETHER YOU REINVEST THE DIVIDENDS OR THE STOCK GOT THE SAME APPRECIATION WITH NO DIVIDEND THE BALANCES ARE THE SAME. the fact you ended up with more shares reinvesting has no bearing on a thing since all along the extra shares were met with an extra reduction . it is only about how much is being compounded on and how much percentage wise did it go up .
 

Last edited:
Now for tax purposes here is what is happening ...
dividends are very inefficient because you are paying taxes up front whether the total return is positive or not that year unlike the same dollars from a portfolio of non div payers where only the gain portion is taxed ..

so to offset that , over time the reinvestment of the dividend is considered new money going back in ...let’s say all these new shares were lowering your cost basis from what you originally paid . But the money going in is counted as new money .

well what happens now is your cost basis per share shows lower when you sell but remember the share price has been lowered to with every dividend so at the end of the day you have a lower cost basis but that is offset with a lower taxable gain because the share price is lowered by each payout along the way .

at the end when you sell the taxes work out the same as if it was all appreciation because you show a lower cost basis and a lower sale price.

but how they calculate things for taxes has nothing to do with your actual return, which is based on ,I put in x amount of dollars and this is what I made in total in appreciation and payouts I did not reinvest
 
Don M. said:
My IRA posted the year end dividends today, and it was a nice year end "bonus". I think it was just about this time last year when the markets tanked and it took weeks/months to recover. I keep watching for another "correction", which appears to be quite overdue, and I wonder how long this market can keep advancing. When, not if, the next downturn arrives, I suspect it will be quite severe.
Click to expand...
If you have a regular IRA, like I do I took this time to set aside money for my RMD. On January 2nd I will transfer that money into our joint account and look for a downturn in the market to invest that cash.
 
oldmontana said:
If you have a regular IRA, like I do I took this time to set aside money for my RMD. On January 2nd I will transfer that money into our joint account and look for a downturn in the market to invest that cash.
Click to expand...
Being at an age where taking advantage of the markets down turn works if your risk level lets you is great. I think most understand that time is the key to what each can handle and sleep at ease. With global competition & new companies starting up no doubt doing due diligence/research is still important.
 
Knight said:
Being at an age where taking advantage of the markets down turn works if your risk level lets you is great. I think most understand that time is the key to what each can handle and sleep at ease. With global competition & new companies starting up no doubt doing due diligence/research is still important.
Click to expand...
I have no problem with risk. At my age according to many so called experts I should be like 70% in bonds and 30% in stocks. I am 90% in stocks. If the market goes down 50% it would not effect our standard of living. But every person situation is not the same.

I also at times sell covered calls and with the market so high I should sell more. But it's easy to do nothing.
 
Former Magellan Fund manger Peter Lynch offered up a quote this week about one general principal of investing. "You will lose more money anticipating the market than being in it."
 
actually that is a very old quote and he originally said more money is lost in preparing for and anticipating the next downturn then has been lost in any downturn . it has been true forever .... even the great depression recovered in 4-1/2 years in dollar terms if you did not exhibit poor investor behavior . a year later 2008 recovered as well and went on to new highs
 
fmdog44 said:
Former Magellan Fund manger Peter Lynch offered up a quote this week about one general principal of investing. "You will lose more money anticipating the market than being in it."
Click to expand...

A quote that makes sense...
Quotes
I am more concerned with the return of my money than the return on my money.
Will Rogers, quoted in Will Rogers Performer, p. 292
 
mathjak107 said:
actually that is a very old quote and he originally said more money is lost in preparing for and anticipating the next downturn then has been lost in any downturn . it has been true forever .... even the great depression recovered in 4-1/2 years in dollar terms if you did not exhibit poor investor behavior . a year later 2008 recovered as well and went on to new highs
Click to expand...
True,"Poor investor behavior"- in the real world when the stocks tremble some get scared and pull out. Others reduce holdings to pay bills because they lost the jobs so the recover time does not apply if one has pulled out reduced their holdings. If one has 100 shares at $10 per then reduces by 1/2 in the beginning of the plunge what is the value of it after the 4 1/2 years? That is a long time for the average person to sit and watch. I just wonder how many people typically reduce their holdings or jump out all together when the markets tank. Because so many young and new investors are in these days I am curious how well schooled they are. It would depend also how well they are diversified. 2020 will be a year of rumors about a recession that have already filled the airwaves.
 
oldmontana said:
A quote that makes sense...
Quotes
I am more concerned with the return of my money than the return on my money.
Will Rogers, quoted in Will Rogers Performer, p. 292
Click to expand...
Then don’t be an investor .No risk no worry ...will said a lot of things that made little sense.....he also said buy land ,they are not making anymore of it ...boy was he wrong ...we have huge developments like battery park city that sits where the water once was
 
mathjak107 said:
Then don’t be an investor .No risk no worry ...will said a lot of things that made little sense.....he also said buy land ,they are not making anymore of it ...boy was he wrong ...we have huge developments like battery park city that sits where the water once was
Click to expand...
OMG...He did not mean that!
 
oldmontana said:
OMG...He did not mean that!
Click to expand...
All investing has risk of loss ...in fact even cd’s have a lot of inflation risk ....so while no one likes to lose money everything has a risk of loss and that risk of loss goes up with equities as well as the returns go up.

We don’t want just our money back ,otherwise we would stick it in a mattress ...we want to grow our money at least a head of inflation as well as meeting financial goals and that is where the focus needs to be , not getting your money back.

another mantra that sounds good but means little ...anyone who’s main concern is return of their money should stick it in a bank ....all other options involve risk vs reward as the concern, not just getting your money back
 
mathjak107 said:
All investing has risk of loss ...in fact even cd’s have a lot of inflation risk ....so while no one likes to lose money everything has a risk of loss and that risk of loss goes up with equities as well as the returns go up.

We don’t want just our money back ,otherwise we would stick it in a mattress ...we want to grow our money at least a head of inflation as well as meeting financial goals and that is where the focus needs to be , not getting your money back.

another mantra that sounds good but means little ...anyone who’s main concern is return of their money should stick it in a bank ....all other options involve risk vs reward as the concern, not just getting your money back
Click to expand...
If you invest in the market you better think hard how safe your investment is, that is basic investing 101 and that is what I think Rogers was saying.

Think what you want!
 
oldmontana said:
If you invest in the market you better think hard how safe your investment is, that is basic investing 101 and that is what I think Rogers was saying.

Think what you want!
Click to expand...
Your concern needs to BE RISK VS REWARD .....not the return of your money ...like I said if your concern is return of your money put it in a bank ......don’t invest.. investing always has more risk and there will always be down years in every asset class always. So logically you can’t be an investor if you are concerned about Not losing money.

every asset has down years and we never know when the recovery is coming .....so what do you do with wills advice ? Exhibit poor investor behavior and bail out ? Never invest ?

wills quotes are entertainment , they are not advice . They have either been shown to be wrong or they are just silly quips with no real financial meaning


Will Rogers Quotes
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it.
 
Last edited:
fmdog44 said:
With the coming of electric vehicles I wonder what would be a good sector to invest in. Not for me but for younger folks.
Click to expand...
Maybe the component suppliers rather than the car manufacturer for younger people especially if nano technology is involved.
 
mathjak107 said:
it has nothing to do with fund fluctuations, market action or anything else .. there is always , yes alway a mandatory reduction in the value of your investment by the same amount as is paid —-period .. Unless it is a bond mutual fund it is impossible to not have an offset in price , it is mandatory. but in any case this the only way it can work whether you think so or not So tell us which fund has no reduction in price going ex div like you say , tell us which fund you claim is exempt ....

Don’t forget a stock can go ex div and drop by a lot , and market action can make it higher then before . But even if markets went up 100% the next day it is 100% on an a lower opening balance than had it been up 100% on the price before it went ex div
Click to expand...
First of all, let me say that I never said a fund is "exempt" from the mandatory price drop. I said price drops are not always the case. A fund may have the obligatory drop in price one time and not the next. Here is one I'm talking about, which is an ETF. According to Schwab's distribution page for this ETF, the Ex date was 12/12 and the record date was 12/13. According to that same page and my account history page, the pay date was 12/17. Now look at Yahoo Finance's daily pricing for this ETF (use adj close column) and you'll see that the share price did not drop by the amount of the per share dividend. I was unable to capture the screen with the ETF's ticker, SCHD while including the NAV for 12/11. Hopefully you can make this large enough to see it clearly or maybe your eyesight is better than mine. :)SCHD CROPPED.jpg
 
OneEyedDiva said:
First of all, let me say that I never said a fund is "exempt" from the mandatory price drop. I said price drops are not always the case. A fund may have the obligatory drop in price one time and not the next. Here is one I'm talking about, which is an ETF. According to Schwab's distribution page for this ETF, the Ex date was 12/12 and the record date was 12/13. According to that same page and my account history page, the pay date was 12/17. Now look at Yahoo Finance's daily pricing for this ETF (use adj close column) and you'll see that the share price did not drop by the amount of the per share dividend. I was unable to capture the screen with the ETF's ticker, SCHD while including the NAV for 12/11. Hopefully you can make this large enough to see it clearly or maybe your eyesight is better than mine. :)View attachment 86227
Click to expand...
Forget the pay date what is the ex div date...you are wrong ....you are looking at the wrong date

The stock closed on dec 11th at 57.41 It went ex div and paid 45 cents out ....it opened dec 12th at 56.96 45 cents less accounting for the dividend .. read that again .

They markets took the 56.96 opening and acted on it and it closed up .o17% to 57.51 ..

Had the stock not gone ex div it would have opened at 57.41 and using the same return on the day .017% it would have been .45 cents higher then it was or 58.39
 
Last edited:
mathjak107 said:
Forget the pay date what is the ex div date...you are wrong ....

The stock closed on dec 11th at 57.41 It went ex div and paid 45 cents out ....it opened dec 12th at 56.96 45 cents less accounting for the dividend ..
Click to expand...
I told you what the ex date was. Read the post again. Also, according to my records and the Yahoo finance page I attached, the dividend was .4666 not .45. (Where did you get 45 cents from?) I see what you're saying about the closing the opening prices but in the end, it matters to me what the closing price is. If I'm going to say...lets see, how much is my investment worth today...I'm not going to look at the opening price and that's not the price my account summary is going to go by either.
 
OneEyedDiva said:
I told you what the ex date was. Read the post again. Also, according to my records and the Yahoo finance page I attached, the dividend was .4666 not .45. (Where did you get 45 cents from?) I see what you're saying about the closing the opening prices but in the end, it matters to me what the closing price is. If I'm going to say...lets see, how much is my investment worth today...I'm not going to look at the opening price and that's not the price my account summary is going to go by either.
Click to expand...
.45 cents or .46 is irrelevant here . You see how right I was .

So you see how every pay out has an offset in the value of what you have left compounding .. you will always have less dollars compounding if you keep the dividend and don’t reinvest then you had the day before. Always

If you reinvest and the pay date is a few weeks later then you are simply putting the same .46 cents back they handed you to work for you at whatever the price is that day or if it is the same day you are putting it back at the days reduced price ....in any case you may have more shares at the same amount you had prior to going ex div working for you.

All gains are solely on market action , not the paying out and reinvesting which is awash for the most part... more shares x a lower reset price is awash ....always. Total return is the be all and end all. By themselves dividend reinvestment carries no more increase in value then a stock split does over what you had before going ex div.

glad we can put this to bed ....... all you need to know is your total return xthe dollars invested .that is the real deal , not a share count
 
Last edited:
mathjak107 said:
.45 cents or .46 is irrelevant here . You see how right I was .

So you see how every pay out has an offset in the value of what you have left compounding .. you will always have less dollars compounding if you keep the dividend and don’t reinvest then you had the day before. Always

If you reinvest and the pay date is a few weeks later then you are simply putting the same .46 cents back they handed you to work for you at whatever the price is that day or if it is the same day you are putting it back at the days reduced price ....in any case you may have more shares at the same amount you had prior to going ex div working for you.

All gains are solely on market action , not the paying out and reinvesting which is awash for the most part... more shares x a lower reset price is awash ....always. Total return is the be all and end all. By themselves dividend reinvestment carries no more increase in value then a stock split does over what you had before going ex div.

glad we can put this to bed ....... all you need to know is your total return xthe dollars invested .that is the real deal , not a share count
Click to expand...
😴😴🤑🤑
 


Back
Top