Free Dividend Fallacy--Why Dividends Don't Increase Your Wealth 

WOW !!! - I have been an avid investor since I was a kid and had no idea about this - I am almost embarrassed or mad at myself for not realizing this on my own - thank you very much for the education here. I do enjoy your videos. Dan

Dividends don't increase your wealth, but investing in quality companies that pay them does

This is a pretty important topic Rob. Thanks! I don’t think this video is necessarily a case against dividend stock investing, I actually see it as a case against *blind* dividend investing, or “chasing the yield.” If one invests in moderately or low dividend-paying *growth* companies (think MSFT), then one doesn’t have to worry about the watchouts that you’ve rightly pointed out. Why? Because when I turn my DRIP on for MSFT, I’m picking up more of those shares that have high future growth potential. Yes, DRIP can be a zero sum game that day or week you reinvested, but if this is a quality growing company, you’re good. This is the dividend investing done right - invest in high-quality growth companies that pay some dividend today and don’t chase high yield!

I feel that you started with your conclusion and tried to select aspects of the dividend payout life cycle to support your argument rather than taking a holistic look at the value of dividend returns. One thing that needs to be considered is what is the alternative to receiving a dividend from the company. Is the company able to reinvest that capital and achieve a respectable IRR? In many cases, the answer is no. In these scenarios, it is better to return the capital to shareholder rather than eroding the returns from the core business.

Even I knew about almost everything you said, you put it in so simple and logic way making me rethink my heavy dividend portfolio allocation. All that matters is total return.

So with dividend investing you get to retain the amount of shares of your company and if you "drip" it buys it back at a lower price (win). You also didn't examine what happens when the market returns and you have retained the amount of shares you have in the company vs the non divided investor who has fewer shares. I think you are missing the boat. 75% of the SP500's growth 1980-2019 came from dividends.

Reinvesting dividends in good companies over the long-term does build wealth especially during down-markets when share prices are reduced and dividends buy more shares.

I live off my dividends for years now and as long as you diversify your portfolios and keep investing through good and bad cycles in great companies, you’ll be just fine .

Hello and thanks for the analysis. You noted quite often the “value” of the stock or the “price” of the stock (or ETF or mutual fund) goes down when a dividend is paid. I believe what goes down is the book value per share, often held to be meaningless. The book value per share has little if any connection to the “price”of the stock. When the price of a stock increases, the investor has u realized capital appreciation. When the investor receives a dividend, he or she realizes income. The sum of capital appreciation and income represents total return and is considered by many to be meaningful in evaluation an investment

Another thing I will point out is that with each dividend paid, Yahoo adjusts all the Adjusted Close numbers down by the latest dividend all the way back to the beginning of time. E.g. for Nov 20 , 2010, Close = 10.95 which is the actual close, but Adj Close = 9.26, a difference of $1.69, even though only a 0.01 dividend was paid on Dec 01, 2010 Adj Close is only a number that Yahoo calculates to adjust for dividends, splits, and capital gain distributions, to facilitate calculating return from one date to another date. It is not the price of any actual transaction.

Thank you! I have been searching for this explanation for a long time. You’re the only one who has made it clear to me. Don’t know why it took me so long to grasp the concepts.

Appreciate the video and I agree with the concept. However, I thought I'd introduce VIG's strong distribution history to support an argument that could be made about stability during bad times. The only year it cut its dividend was in 2009, following the great financial crisis in which we had almost lost our banking system. In 2008 it paid an annual amount of $1.026 and in 2009 it paid $0.979 . That is less than a 5% cut during one of the most difficult economic times in the history of the US.

As a beginner in investing I would like to thank you very much for the explanation and the examples. It is really easy to understand the way you explain things. The dividend hype and fake assumptions I had are more in control now and I am thankful I came across with this video, because I think the best way for anyone to invest is check the fact instead of letting emotions decide for you.

Portfolio to analyze… 20% FLCSX 45% FSKAX 15% FSPSX 5% FIKCX 8% FXNAX 7% FIQTX. Question, why would Warren Buffet select 10 short term gov versus total bond fund? Thanks!!!

Thanks, Rob, for enlightening me on the difference between the tax outcomes of dividend income and selling stock shares for a profit to create income for retirees. I never thought to compare the two. Receiving income sounds easier than selling stock but as you explain it, dividends create more taxes. Do you have a video on the best way to sell stocks in retirement?

I personally have a mix. Truth be told, you have mature businesses that are not in aggressive growth mode. They need to do something with retained earnings and thus pay shareholders a portion of retained earnings in the form of dividends. I hold dividend paying stocks with no intent to ever sell. It will allow me to retire early with dividends that provide a fairly stable cash flow. I also have my 401k, IRA and other investment vehicles - Dividend paying stocks is just one of the tools for me.

This is a great video! I consider myself a well educated investor but I have to admit that this video really opened my eyes to dividends. Keep up the good work!

Thanks for a very clear explanation of dividend stocks. I own a mix of dividend stocks, value stocks and a global index fund. I know that I wont get a super high value return since the dividend companys are mature and therefore don't grow in size. But I also think that my risk level is lower since these companys know what they are doing and how to make money. My comment is when the market turns up again after a crash, isn't it then an advantage to still own more stocks?

I've backtested several high dividend strategies vs just investing in something like VTSAX and the high dividend strategy always ended up performing poorly over the long term. The high dividends come at the expense of growth and that can be a huge drag. So, yes, it's a huge myth that continues to live on due to a fundamental misunderstanding of how dividends work. Thanks for covering this topic.

I agree in that one shouldn't make a decision on buying a stock solely based on its dividend. However, most good companies worth owning pay a dividend, or will likely eventually pay a dividend, because they are companies that are earning cash profits to such an extent that they are giving those profits to shareholders when it makes sense to do so. When buying stocks, the criteria used should be centered around the quality of the business and its management.

Myself I like dividend growth investing. Have a portfolio with both dividends and growth stocks and dividend growth stocks just so I can add to positions with good companies and still obtain that growth I’ve found that’s helped me a lot

The stock market does not set prices based on the NAV of the stock. It is based on sentiment and expected future returns of the company. Most of what you do is great, but this makes me question your understanding on how stocks are priced

The adjusted closing price is simply a tool that people can use if they choose for analysis reasons. It is not the value of the last transaction on the market that day, which is truly the market-driven closing price. The company did not reach into your portfolio account and pay you with your own money. Instead, they reached into the company's cash reserves and chose to pay you instead of using it for something else. They did not affect their own ability to produce free cash flow, which is what the shareholder is arguably holding.

Companies have a choice: reinvest profits (stock price goes up) or pay dividends (stock price stays the same - or dips by a trivial amount). Either way, wealth is being generated. You either get that wealth generation in the form of higher stock or in the form of a dividend, but the end result for the investor is the same.

I will add something from my own experience. I once owned a company that paid a dividend. They were not doing well financially so the dividend was at 13% yield because of it. I thought ok it’s a big risk but I will take it until they turn things around and even if they reduced their dividend it would still be an acceptable amount. Well a new CEO came on board and eliminated the dividend. I sold right away @ $6.30 per share. Since then the price crashed and it’s now less than $1.00. In this case it seems the dividend actually increased the share price. Removing it should have increased the price if things are as you say.

Hi Rob Even as a British investor I enjoy your videos. I would query your example of dividend v non dividend regarding sequence of returns risk because surely the point is that the dividend investor ends up with the same number of shares( even though they have lost more value) but importantly these shares can all then recover in value as the market eventually goes up.

Holy smokes.... all these years studying investing and i still learned something new! Thanks...

Hi Rob, Great video (enjoy your other videos as well). I have the same view about dividends. I have discussions with others about this topic and most just do not understand or do not want to admit it. A few other points about dividends. I look at dividends as a withdrawal rate on my capital that is pre-determined by the company paying the dividend (I much rather have my own withdrawal rate). Also, most like to argue that the price adjustment somehow magically comes back immediately to make up the loss in value as a result of the dividend adjustment. My argument back is if that were true, then I could do the following: There are 250 trading days per year. I could just find a stock for each trading day of the year and capture the dividend. In other words, I could just roll my capital from stock to stock and capture the dividend for 250 days a year. In this scenario, if the average yield on a stock is 3%, then in theory I could make roughly 180% in profits (yes, $1 becomes $2.80) each year. However, dividend capture strategies have mixed results at best proving that the price does not make up for the price adjustment for the dividend.

I wonder how many people would have answered differently now than a year ago. Love my dividends in this economy

The main reason to invest with Company paying dividends is not the dividends themselves but that the Company is strong enough financially to do so. There is some trade-off of future growth by paying dividends but entire objective of investments is to reduce your risk. Your risk are lower by investing with Companies with strong free cash flow, consistent sales growth & dividends.

This is excellent information and a very different perspective on the topic. I had no idea regarding this fallacy regarding dividends. Thank you Sir for another great video.

Where to begin! Yes, the dividend payout does indeed reduce the per share price when paid, however Mr. Market controls adjusting share price movement constantly. Share prices going down do indeed attract buyers who may be dollar cost averaging and adding more shares to their holdings. Dividend recipients my choose to DRIP back into the underlying stock (or REIT or BDC) to grow their portfolio organically or look for value elsewhere. For an IRA, retirees tend to use their growing dividends (yes, stocks of quality companies do grow their dividends) to fund their annual RMD obligations without having to sell shares of stocks to do so for as long as possible -- and use excess dividends to (again) grow their portfolio organically. In retirement, we retirees tend to look at growing dividends from our holdings as income (cash flow) to supplement Social Security, pension(s), and annuities. Total return has meaning on paper, but you can't spend or reinvest total return unless you physically sell your holdings. With growing dividends -- the cash flow is there to reinvest and fund your retirement. The key to successful DGI (dividend growth income) investing is to own quality companies that have a track record of paying and growing dividends over many years (Dividend Aristocrats, Dividend Kings, etc.) and use dividends to grow the portfolio from within. GLTA

If stocks are held over long periods of time, in many cases the dividend percentages slowly increase. So one may, for example start with a 1% dividend, and end up years later with a 4% dividend, including upon the increases in numbers of shares if the dividends were reinvested. Of course, dividends can decrease also. Nothing's certain; I keep some dividend stocks and some without for growth. Sometimes I trade one dividend stock for another that I think will perform better while still providing a decent dividend. It's a moving target. I think with dividend stocks, one hope their share price recovers in a reasonable amount of time, say 1 to 3 weeks. I guess than one might have to consider, well maybe the growth stock increased that much also? I've heard over decades, dividends contribute about 40% of S&P earnings. Interesting and thought-provoking discussion.

Great presentation, thank you. I suspected that there are no “free” rides in the stock market without accepting risk.

HUGELY important video! I’ve been investing and studying investing for decades, yet I only recently learned this important fact. Nobody talks about it, I honestly think most “experts” don’t even know. I also recently discovered your RU-vid channel, GREAT JOB!!!

Discovered your channel a few days ago and have to say, for someone who is deeply interested in financial markets and investing, it's amazing. Love the long-form content and detailed breakdowns, tons of value here, thank you!

I like your explanation but I have one question. Let's say the value of my stock went from $50.00 to $45.00 dollars after the dividend came out and 1 week later that stock was back up to $50.00 wouldn't you have to say that the dividend in now pure profit?

Don’t know if you’ll ever see this question cause it’s an older video, however in response to new to me info re dividends my question is: Is it better not to reinvest dividends back into individual stocks in a taxable account or does it matter? Thanks!

I tell this to my friends for years and they still do not get the idea.

Thanks very much this is first time im hearing this and it changes my mind on dividends by quite a bit

well!! I have used my DIV's to purchase and diversify my portfolio, and my wealth have grown quite substantially...

Direct quotes from Fidelity Dividends have accounted for 40% of stock market returns since 1930 and 54% during decades when inflation has been high1. When inflation has been high, the stocks that have increased their dividends the most have outperformed the overall market. Dividend payments may help make a stock's total return less volatile.

I've been researching how to simplify our investments, generate income (when the time comes) and still remain tax free in retirement with another 20 years to go to full retirement age. While we're firmly in the 12% bracket so we have a 0% LTCG/QD rate, I'm also in the midst of a long term plan to convert ALL of our tax deferred investment to our Roth IRA account slowly over time and under taxable limits. Unfortunately, dividends interfere with this plan since I'm using the form 8880 retirement savers credit and I'd lose that with excessive dividend income. I also don't like how dividends greatly reduce or even eliminate capital appreciation. Currently I'm thinking that a S&P 500 index fund for our taxable investments with it's low dividend yield and reinvesting the dividends for now and then after I'm done with the Roth conversions re-evaluating. In retirement we'd have Social Security, some taxable interest, I could take the dividend income from the Index funds rather than re-investing it (if needed) and then take as much or as little (or none) from our Roth IRA accounts as we wish while still remaining completely tax free, even when there's only one of us left. I like the idea of still enjoying some capital appreciation while getting a little dividend income when/if needed that's easily "activated". No RMDs to deal with, ultimate flexibility and even some "headroom" in our tax bracket to "step up" the cost basis of our taxable investments just in case they change the LTCG/QD rates or if we need to sell a large portion of our taxable holdings, above our tax-free limits. It's a complex issue but with far-sighted tax planning it's possible to move mountains and find the best solutions.

Many companies have stopped paying dividends since the pandemic, too.

I've watched lots of your videos. They're all great. But this video was the most helpful, well articulated video yet! Thank you.

The S/P price index w negative 24% from 2000- 2010. The S/P price index minus dividends accounts for 40% of the S/P return over an average rolling 10 year period

It seems dividend stocks attract a lot of attention, causing market buyers to purchase them - potentially over non dividend stocks. Does this not cause stock prices to rise potentially more than non dividend stocks simply because of the attractiveness of them (even if dividend stocks are only paying you your own money)?

Rob. I think that a more Holistic Analysis would be to compare the Total Return (Capital Appreciation & Dividends & Interest (if applicable) of Top Dividend paying Stocks vs Top Non - Dividend Paying Stocks,. I think that you will find that the Capital Appreciation of the Stocks are similar, so getting paid the Dividend is a Bonus. I do understand that its payed out of the Earnings.

In bear markets growth (non-dividend) stocks usually lose much more value than value stocks. So while theoretically the dividend vs non-dividend case may not be different, in reality it's more complicated. The core idea here that paying dividends is basically the same as selling long term gains is important to be aware of, it's true that they are not "free."

I'm glad i found your channel, it's good info to point out since most people (including me) would just see dividends and interest earned as the same thing. Never would've found that significant detail about dividends payouts. As you say, it doesn't make dividend stocks bad, it's just details to be aware of.

Thank you Rob, I have been really learning to be more critical of investments because of you! I am a big fan of dividend investing (even as I am not yet retired) and re-investing it to gain more shares... question: does your video apply to REITS? Thanks again.

Rob, Thank you. I enjoyed your video. I think you gave more emphasis on the theory that the companies you invested in, will always be profitable and use the earnings for growth and further increase their value and hence your investment return. That's the best-case scenario for growth-based investment. If companies payout some earnings to investors in form of dividends, Investors can also make better use of the dividends for diversifying their investments. Hence minimizing the risk rather than risking the growth companies to re-invest all the company's earnings. Thank you again for some insights on tax thing.

Just because a company reduces the stock value then pays the difference, doesn't mean you dont gain any wealth. If you bought 1 stock at 10.00, then it was mechanically lowered to 9.90 in order to pay you 0.10, it does not mean they are using your own money to pay you. You're stock absolute value is still 10.00, regardless of how much it is reduced to pay you dividend. (Absolute value is the price you payed for all your stocks (averaging them out if you bought more later) versus the current value) All the examples you show, the value returned to normal and is higher than before. You still make money. The whiteboard example is off, it should be 500k vs 460k. 1mil each port, the div port gains 40k, (the 4% yield is moot, what matters is the total value distributed for that 1 year). So both port would end up as 1.04mil vs 1mil. The stock lost value and the portfolio is now 540k (40k from divs, yes its still there, its absolute, you gained that in the year) vs 500k for the other. They both are told to sell 40k worth of stock, 540k becomes 500, vs 500k becoming 460k Div portfolio vs non div portfolio 500k vs 460k The take away from all this? Stocks that pay dividends are still a better choice, you get a small monthly/quarterly distribution AND you have the option to sell the stock when it goes high and buy more when it is low (the same thing you would do if you bought a stock for appreciation value).

Wow ….I never thought of it that way and I’ve been an investor since the 80’s! Good video! Keep up the good work!

In Canada, for low or moderate incomes, the effective income tax rate on (Canadian company) dividends is lower than for capital gains. Assuming, as a retiree, you need to 'withdraw' money from your portfolio, I would rather withdraw it as dividend income.

I noticed that the day after the divided date the day starts off lower the the close of the prior day as well.

This is such a thorough analysis that cuts through all of the emotion to highlight what dividends are, what they can do, and what they can’t do. I wish I would have watched this before I watched hours of pro-dividend strategy videos from other channels. Well done!

Thank you very much for making this video and highlighting this very important aspect. I heard the stories and saw the videos of people living off their dividend portfolios. I was on the fence about considering the same until I watched this. I'm now content to just carry on with my total US & total international funds

I was up 58% on my tobacco holdings in 2022, paying 9% dividend yield too. Not all dividend stocks are equal.

The dividend stock holder can reinvest the dividend back at the lower price. The non-dividend stock holder cannot.

Berkshire doesn't pay a dividend but Buffett always invests in dividend stocks. Why ? So he can invest the money as he wants

Thank you for this video. I think many people fixate on dividends and don't understand the math behind why total returns are what actually matter. It isn't a complicated topic, but thanks to all of the misinformation out there, too many people have the wrong idea about how to measure a stock's performance.

The reduction is share price is an accounting function. The JE is essentially Dr. Retained Earnings / Owners' Equity Cr. Cash. At the end of the day the share price changes nominally and will go up shortly provided it's still a good company. So... enjoy your dividend.

Companies do not set stock prices..markets do. If dividends reduce stock prices why dont other operating expenses do the same ?

Many thanks Rob. Very helpful. What if I wanted to produce income not relying on dividend? Sell stocks? - Can you explain what alternative options there are if dividends are not the solution to regular income from investments? Thank you.

So how does this compare to Reit dividend returns? Those are dividends too right?

Great job..Rob..good teaching my friend..cheers..

Why should I care that the stock price goes down after a dividend payment? I feel I should care about long term ability of the companies ability to pay the dividend because of the companies fundamentals strength. Day to day or quarter to quarter price fluctuations mean little imo.

What about the fact that dividends allow you to purchase more shares and thus have more votes whereas if you were to sell share to create your own dividend your amount of shares would decrease and you'd have less votes in the company

Question: Ill keep it very simple - Example: I started buying KO a long time back in the 25-30 range and it pays a dividend which i reinvested into additional shares. Fast Forward to present and i still have it and i have added shares over time increasaing my position hugely. So, price appreciation aside for a sec and with the reinvestment into additional shares and compounding etc-. How is it that this is a bad idea? please explain because i just do not see it

I recently read an article on Forbes (7 best retirement funds of 2022). The article recommended Vanguard's Wellesley and Wellington funds and these are highly rated funds. Wellesley and Wellington invest primarily in dividend paying stocks. This article was written by Rob Berger. If you invested $10k in an S&P 500 fund (VFINX) in 1986 you would have about $394k today with dividends reinvested. Do not reinvest the dividends your total is $156k. (Portfolio Visualizer) That's a big difference. To say "dividends don't increase your wealth"? I don't get it.

Good video. Thx. Seems many don’t get it. Follow up video? IMO key investing subject. Edit: I can w/last diagram why some would say but w/div stocks I still own shares just lower value.

Very interesting Rob. You know way more than I do but after the dividend is paid, the amount is replenished by earnings. In the savings example, the amount never goes back up to 100% because that's all you have...but the dividends are created by earnings. Please show me where I'm missing something. BTW, dividend growth investor here.

Are the monthly dividends paid by bond etfs and mutual funds in the same category as dividends paid by stocks, stock etfs, and stock mutual funds?

19:25 "I heard dividends are, like, the BOMB." 🤣🤣🤣 But seriously, once I bought a super high-dividend REIT. It was a horrible experience since the share price went continually down. Now I have some idea what was happening.

Nice work and explanation! Thanks! Kind of reminds me conservation of energy and thermodynamics. There is no free lunch! Moreover, the investor pays taxes on dividends and no taxes on stock price increases - until they sell of course. Dividends can go down too - so much for "security".

Rob, I am learning so much from you. You’re worth your weight in gold!

I'm living on dividends and the beauty is the number of shares I own has not decreased. I see dividends like water in a pot. The water is the equivalent of a stock price. As a company earns money, the water in the pot increases. When the company distributes some of those earnings, the water in the pot temporarily decreases. The water in the pot will refill as the company earns more money. As long as you don't sell all of the water, and the company continues to earn money, you will never run out of money if you just withdraw the dividend. If you start withdrawing entire shares, you could run out of money if the stock market drops too much and you sold too many shares.

Interesting and enlightening video, thank you! If folks are still enamored with ‘aristocrat companies’, that’s all well and good, but then you’re talking about stock-picking, which brings some element of risk into the equation, however small. Also, in the scenario you laid out, you were extremely generous with the dividend payout being exactly the same in a down market.

Dividends are essentially forced selling which is bad in a bear market or when the market is down and gives people less control on when they are taxed on their investments.

You need to do the math over the long term. Prices rebound post the dividend date. In addition, taxation is different. Qualified dividends are taxed at 15% while long term capital gains are taxed at 20%. Please don’t base your analysis on short term data without doing the detailed math. A properly structured dividend portfolio can provide a stream of income. You do your viewers a disservice by looking at the short term and disregarding the long term analysis. Keep growing and learning. Much love for your efforts & best wishes.

So if you are going off the 4% rule for withdrawls in retrirement...should you be subtracting any dividend yield from that 4% to adjust? Otherwise wouldn't say with a 2% dividiend yield and 4% withdrawl you technically be withdrawing 6% at that point?

This may be the case, and it’s good to know. But it doesn’t change the effect of dividend snowballing. Interest snowballing is a thing too. I guess the difference is the change in stock price of a healthy, solid company over the long term.

Thank you for this video. I'm at an age where I think I have fully grasped a concept, but later realize I might have a gap here and there. I'm going to review the video a second time.

If any company discontinues dividend payments, there will be new nominees for the board of directors. There are exceptions to discontinue the dividends and most investors align with those particular exceptions. But a company sitting on large sum of money and all objectives are fully funded, investors will start applying pressure.

I would argue it's not quite true that the owner of the dividend fund has no control: she can choose to reinvest some or all of the dividend. That provides approximately the equivalent of the non-dividend fund holder's ability to decide on the timing and amount of selling shares. I do agree, though, that the dividend fund holder ends up with less control over the tax aspect. That said, thanks for another great video: very clear and useful!

Appreciated this Tutorial; T-Shirt: Nice fitting - what Brand?

I started late in my value investing journey and I learn something everyday ! How does this dividend affect RIETS ? plus I know dividends are very tax inefficient ! So I assume the drip is still the best option all the more so being that it's not "new" money

I think a dividend is similar to a stock split with a forced sale. A 5% dividend is like getting 21 shares for every 20 you have. Then selling that share. Then paying tax. Then rebuying that share if reinvesting dividends.

I tried calculating the difference between "close" and "adjusted close" for Mcdonalds (MCD) at time of dividend. The stock price difference is equal to the dividend only for the most current dividend. If I do the calculation on prior dividends, the difference does not equal the dividend amount. What gives?

This vidoe is foolishness. Dividend stocks tend to have lower PE Ratios. Paying out a portion of earnings to shareholders. Most Growth stocks have high PE Rations and no earnings

I agree, but in that case why does Warren Buffet like dividend paying companies? Also would a dividend king paying company be safer? Dont get me wrong most of my money is in index funds (which pay about 2% dividend a year, but good growth as well).

As long as an equity doesn't lose significant value, you double your money every ten years with a 10% dividend and reinvesting the dividend back in the stock. There are equities out there that pay near 10%. Tell me what type of industry or stock you will double your money in 10 years.

With the non-dividend investment you only pay taxes on the gain when selling stock. Isn't there an additional tax benefit in that capital gains taxes are at a lower rate than dividend income?

It seems the price recovers within days fir the most part. For those not taking income yet you would be growing your number of shares at each payout? Seemingly at lower prices in this case. Then you have the rebound when, and it does, the market returns. Just thoughts…

I wonder about the wisdom of stock buybacks? I'm guessing this is only slightly better than issuing dividends. And that slightly better is only better in terms of tax liability? What do you think? What happens if a company just uses its excess cash to build a war-chest?

i agree to some extent but in an extended down market i collect dividends, reinvest and buy MORE shares because the price is down, when the market lows return to normal levels i make extra gains and will likely be back above where it started.

Thank you. I was about to go 100% SCHD because I too thought that dividends where extra money. Back to the drawing board.

Rob: The small reduction in share price due to dividends is only temporary . Unlike your bank account analogy where you permanently lost 100 dollars, the small reduction in share price will be quickly revalued by the market if the company is healthy. The investor will then have more shares or more cash in hand .

I wish there were more videos out there on this topic. My husband wants to buy stocks just because they offer dividends, while I prefer to look at the company's fundamentals and not worry about whether a dividend is given out. I'm also more of a buy and hold value investor type, while he's happy to trade stocks as quickly as Vanguard will allow. Are ETFs that focus on high dividend yielding stocks a good value investment?