**: bottom line AKA the point
A recent article was published by Jing Pan on Yahoo Finance that explained how Bank of America predicts 0% returns in the stock market for the next 10 years.
If you’re like me you may be asking well, “What is the average stock market return over 10 years?”
According to Motley Food, here is the answer:
- 13.9% in the last 10 years
- 10.7% in the last 30 years
- 10.9% in the last 50 years
A good market return is anywhere between 7%-9% so to have a 13.9% for the last 10 years is out of this world!
However, that brings us to our next point. There is talk that the stock market is over inflated. This means that the price of stocks is more than what they should be.
The point of the article is how to beat this 0% return in the next 10 years. Their answer: “reinvesting dividends”
Some stocks offer additional earnings when they out-perform the market. Say for example you purchase Apple stock. A year later your initial investment, say $100, is now worth $200. Congratulations, you just doubled your investment! BUT, if Apple paid out dividends (which they do) you would get additional money.
Now, you have two options when you are owed dividends.
1) Cash Money
2) Dividend reinvestment
If you were in or close to retirement age you would choose the cash money option to help you pay your bills. However, if you are investing early on and do not need that money you would choose to reinvest your dividend earnings and earn compound interest (which we will talk about in another post).
With all that being said, dividend reinvestment is a great option when you have a lot of money invest in that single stock.
For example, for Apple, “in 2020 it [dividend] was $0.795” per share. Dividends are great but you either need a lot of money in that single stock or a lot of time in that stock for it to really make a difference.
So, if this Bank of America article is true, how will you see a gain in the next 10 years?
My answer: learn to create additional income!
Want to learn how? Check out iquit9to5.com to learn how to create additional streams of income ALONG SIDE what you are already doing!
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