Handy illustration of the value of stock market investing


#1

Just read a post on the www.Moneysavingexpert.com website from someone called JimJames that illustrates the value of stock makret investing, especially of interest for the nervous types but it applies to all.

He’s highlighted the high amount of income you receive regardless of how volitile the share price is.

Have a look at it here.


#2

Agree, interesting illustration but wouldn’t it be better if you pasted the whole post here.


#3

I wouldn’t tend to do that without asking their permission and anyway it’s easy to click through to the Moneysavingexpert forms.


#4

Fair point @smithy101

You could ask them if they want to publish it here or even get it published as an article. I’ve seen other people do it and the newsletter says they’re always looking for new articles.

I think it would be useful for newbies or for people like my Mother or wife who just don’t get the stock market.


#5

Yeah it is an interesting little piece and I agree with @ronmac it would be interesting for people who don’t know much about the stock market.

I am still really fairly new to investing and it is certainly pertinent to someone like me.

I’m sure @whichinvest would let it be published as an article?


#6

We would be happy to publish it @twinkle @ronmac @smithy101 or the writer can share it on here but we agree that his permission should be obtained first.

Thanks


#7

It is a good illustration of what you get while you’re waiting for the share price to rise. Good effort by @Jimjames

It would be useful if he or someone else extended it a little bit so that it included the effect when you reinvest the dividends rather than take it out because this will have an even greater impact.

Good find though @smithy101 and good work @jimjames


#8

The original author of the article on MSE, jimjames, has now created a post on that thread which does show the effect of re-investing dividends.

What I will say, though, is that re-investing dividends is quite different to the point made in the last sentence of the first post on the thread, i.e. that fluctuations in the value of the capital should be less of an issue if the primary concern is for the income - in which case, the investor should be more concerned both with the reliability of the level of income and its rate of growth, which ideally should match the investor’s personal rate of inflation, i.e. the rate at which their own annual expenditure rises. And assuming that their capital does not get depleted to zero in the process!

Once you do start talking about re-investing then you’re into a different ball game, namely Total Return investing. Here, both the level of income and its growth rate can take a back seat because the longer term aim is for the capital to grow in value. ‘Why?’ did I hear somebody say? 'When we all know that a good proportion of the long-term returns from equities is from the dividends being re-invested.. For the simple fact that when a dividend is re-invested, it ceases to be a dividend and instead becomes capital - so in this case the value if capital is more relevant, However, so long as the trend in value is upwards, the volatility in its value should be less of an issue - except towards the end of the investment timescale when a sudden lurch downwards of 10-20% might cause a few palpitations (although I am wandering into ‘drawdown’ territory here).


#9

It is a great illustration of the ebbs and flows of a stock market based investment. I saw in the Moneysavingexpert.com article he said he’d pask to publish it here; I wonder if the WhichInvestmenttrust.com folks said no or if he didn’t ask?

His website is pretty interesting too http://damn-lies-and-statistics.blogspot.co.uk/2015/10/investments-returns-real-life-example.html