4 ms·
You don't exchange any stock when you're paid dividend. If you sold a bit of your holdings each year you would eventually have no equity left.
by rishabhparikh 8y ago
You don't exchange any stock when you're paid dividend. If you sold a bit of your holdings each year you would eventually have no equity left.
- deleted 8y ago[deleted]
- nradov 8y agoDo you want to have your cake and eat it too? The difference is that if the company pays dividends then the stock price will drop because it represents a claim on a smaller amount of assets. So you can achieve exactly the same effect yourself by periodically selling a small percentage of your holdings. It's like having a big piece of a small cake versus a small piece of a big cake: if you get the same amount of cake in the end then who cares how it's shaped.
- philwelch 8y agoIf the dollar value of your holdings appreciates by 7% each year and you sell 4% of your holdings each year (by dollar value), you can keep selling indefinitely. (This is, incidentally, exactly how retirement accounts work.)
- harryh 8y agoIf you sell a fixed % of your holdings every year (that is equivalent to the % you would get paid in cash due to a dividend) you will never run out of equity.