Dividends vs. Retained Earnings (Why Retaining Earnings Is Better Than Dividends)

Dividends vs retained earnings – what is best from a shareholders perspective? In this article, I discuss dividends vs. retained earnings and where the capital compounds best:  in your hands or in the company’s hands. Distributions and subsequent reinvestments are an inefficient way of compounding! Given certain assumptions, it’s better to retain the earnings instead…

The Case Against DRIP And Compounding Dividends (Arguments Against Compounding Dividends)

Compounding dividends and DRIP investing are popular. That is understandable because dividends have been a significant contributor to long-term gains in the stock market. It’s essential that you reinvest dividends to get the returns of the market, but many investors mistakenly focus solely on dividend stocks because of this. But a company has many opportunities…

Dividend Investing: The Marginal Rate Of Return/Incremental Return (Incremental Return On Investment)

The marginal rate of return is the most important factor to compound efficiently. In the long run, your pension is more dependent on the marginal rate of return than the original investment. If you are into dividend investing, you really ought to study the marginal rate of return on your investments. We argue that dividend…

Why Capital Gains Are Better Than Dividends (Sell Shares To Get Income)

If you’re a dividend investor, did you know that you can sell shares to get the same “income”? A lot of investors swear to invest only in dividend stocks to get “income”. While I agree a dividend can serve as a useful heuristic in investing, a more rational approach would be to look at each…

How Taxes Affect Your Compounding Interest (Taxes And Compounding)

How do taxes affect your compounding interest? To shelter your savings from taxation while building your nest egg is extremely important and you better understand taxes and compounding. I believe this is pretty obvious for most investors, but I suspect it’s still neglected because the headwind takes about ten years to really make a difference….