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How does that come with the sum of all monies lost on trading with S&P500 shares? Serious question.

• jfengel 6y ago
  The sum of all monies lost trading S&P500 shares should be negative, since the index as a whole was up. Which isn't to say it'll be up forever, but over a scale of years it has historically always been up. Even if you lost money trading S&P 500 shares, somebody else made more, which is why the index is up. Even so, that figure isn't really relevant to the GP's point. Their point was that in addition to the price of the stocks, people who owned those stocks got cash money paid into their pockets, via dividends. That amounts to about 1.1% interest on money you spend buying the shares[1]. (That's not actually a great number. 2% is more common over the last 20 years. It suggests that as of right now the market is overpriced. But that's also for 2020, which is not a typical year. So far for 2021, it's more like 1.5%) [1] https://www.multpl.com/s-p-500-dividend-yield https://www.multpl.com/s-p-500-dividend-yield
  • saalweachter 6y ago
    When you factor in stock buybacks -- which are sort of but not quite the same as dividends -- it's "sort of" like 3%. (My vague understanding is that for complicated and silly reasons, many more companies have preferred stock buybacks to dividends in recent decades, but it's still money flowing back from companies to investors.)
    • jfengel 6y ago
      That's a very good point. Thank you; I had missed that.
    • imtringued 6y ago
      There are two factors. The tax code favors one form of compensation and low interest rate money means it is actually possible to execute this strategy. When companies borrow money to skip taxes you know that the central bank isn't doing its job properly.