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Windows 8 is an abomination upon the Earth.

carytilden, Reinvestment of earnings by corporations is an important factor in growing returns. It does work in a compounding fashion. However, you can only say that dividends don't matter if you believe like Larry does that MM theory works in the real world. That is that every dollar not paid out i...

Larry, MM theory is theory. It is not fact. Compounding is a major driver of returns; that is a basic fact of investing. And by the way, it seems that Farmer and French are in the cult. Let me quote them from the abstract of their paper "The Anatomy of Value and Growth Stock Returns": &quo...

Well I see that people still do not understand how dividends provide return. Dividends matter because they compound and produce return. If a stock has a 4% yield, then at the end of the year you have 4% more shares. Next year, you have 8.16% more shares. The year after that, you own 12.49% more shar...

Taylor,

Like you I am constantly disappointed in the quality of information in Barron's. However, unlike you I have not developed the will-power to not buy it. To my credit though, I have stopped buying large bags of popcorn.

Larry,

Great! You can't have too much value. That certainly has the ring of truth about it. Are there any funds that load up on the top decile of value? That would seem to be the place to be.

TJSI

bertilak, Another possibility is that high dividend stocks have too much value. It looks like you want a portfolio of moderate losers not big time losers. Has anyone ever compared the return of a portfolio of high value stocks vs ordinary value stocks? If high value performs poorly, then we can proc...

Humor aside, it is a very good book. If you enjoy math, physics, and "The Market", you will find this a good read.

(PS: Victoria I hope your physicist friend warned you about the dangers of entanglement.)

I can think of two possibilities: 1. Using an available local WIFI signal. Some PCs will tell you if there is a WIFI signal available. If there is you may be able to access it. If a neighbor has installed WIFI they may let you us it or you can make then an offer of say $10 a month to use their signa...

FinacialDave, If you achieve 0 taxes, you deserve a lifetime boglehead achievement award. I just finished my fed taxes and it hurts so bad. I think for now, LTCG and divs are taxed the same. But there is something going on in Wash that may change things. (PS: I never liked that capital losses were l...

FinancialDave,

The tax-man knows the tax law in all its complexity. The wise investor tries to minimize their taxes. I think (consult the tax-man for accuracy) there is an extra 3.8% tax levied on capital gains in 2013 for certain tax-payers to support Medicare.

Ogd, You are mixing up the concepts of earnings retention and capital gains. Retained earnings do have a compounding action as companies "plow-back" earnings to generate new (hopefully greater) earnings. Capital gain is something an investor does--not the company. Whether a particular inve...

carytilden, Nope. I am saying that dividends and capital gains are two different return vehicles. They are not ( repeat not) the same. You can compound dividends with ease. Capital gains must be harvested and then re-invested with some plan. I am sure that there are those who succeed in making good ...

Betilak, Thanks for posting the charts. Dividends indeed play an important part in building a growing portfolio. Those who keep repeating that its total return are performing a disservice. Dividends and capital gains are not fungible in the real world. Probably the biggest problem with compounding d...

Larry, It was not I who wrote that article in the Journal 0f Portfolio Management that showed that dividends produced almost all the gains in the value portfolio. I take no credit or blame. Frankly, I was surprised by the result as I thought that valuation change would be a big part of the answer. H...

Cultists Arise! I thought it odd that there was no analysis of the role dividends played in the above market performance of value (high B/M) portfolios. Well there is. It was mentioned by Rick Ferri above and it is highly informative. ( See: The Journal of Portfolio Management, "Rebalancing and...

I have no more logs to throw on the fire.

Larry, I have not seen any quote from Farma & French that dividends don't matter. They have said that low b/m is a better screen than dividends alone in producing returns. That is a far cry than your repeated attacks on dividends stating that they don't matter. I suspect that the b/m screen prod...

Larry, You are in deep denial of the importance of dividends. You seem to deny the existence of the many investors who are trying to grow their portfolios. For those who wish to spend their gains, reap their rewards, liquidate their assets, the difference between capital gains and dividends many not...

Ketawa, Unfortunately, share buybacks won't get you the magic of compounding. It will deplete your portfolio. (And let me congratulate the CEO of Citibank who recently stated that they wanted to do one billion of buybacks to support their management option programs. No happy talk of benefiting the s...

Ketwa,

I can assure that compounding is not an accounting trick. You say that you can beat market returns by active management taking your capital gains and investing them in underweight sectors/stocks. Good luck with that--some succeed, some fail, and some get lucky.

Just to throw a little more wood on the fire. A dollar of dividends is a compounding asset; a dollar of capital gains is a liquidating asset. If you keep on selling your assets to get your return, you eventually end up with an empty portfolio. There have been numerous studies showing the importance ...

Has there been a study performed comparing the return of non-dividend paying value stocks to dividend paying value stocks? If not, I think it would be interesting to see how much of the "value premium" is due to dividend payouts.

Rick, Thanks for the link to the article by Innosight on Creative Destruction. It was one of the most interesting and eye-openning papers I have read. And it was short! It certainly casts doubt on the use of PE10 going forward as a prognostication tool. The change in corporate longevity certainly ha...

So what does Mr Shiller say about all this? From today's NY Times (3/10) Business Section: " The CAPE has been high of late:it stands at 23, compared with a historical average of around 15. This suggests that the market is somewhat overpriced and might show below-average returns in the futire.&...

Are there steps that can be taken to avoid scams when using an Internet site like Craigslist and VRBO? I have rented remotely at Siesta Key but the locations were listed in a publication provided by the Chamber of Commerce. I have read about rental (and even buying scams) and wonder if there are way...

Well I don't want to touch off a debate on what the meaning of is is. But the compounding of earnings means more than just the multiplication of yearly earnings. In the sense of compounded earnings, it means that earnings are reinvested and generate more earnings. This is the feedback mechanism I me...

Thanks for the responses on the subject of compounding and risk. It seems that many have a more expansive view of the term compounding. For many compounding means the same as increasing. I have a more restrictive meaning. And as I thought about this on a rainy Saturday, it seems to me that the devel...

Can someone offer an explanation for how risk compounds over time? I believe for compounding there must be some type of mechanism at work. There must be some type of feedback action occuring. If it just means that if you wait long enough, something really bad will occur--that I can can buy.

I think the argument about dividend payouts is endless. And maybe that is what makes it interesting. There are those who think that once a company has passed out of its intial growth stage and is succcesful the discipline of paying dividends prevents management from wasting money. The choice is not ...

Nisiprius ( and thank you for your thoughful discussion) has used a 6+ year chart of VHDYX & VYM to question the efficacy of dividend paying stocks to provide superior returns. The advantage of dividend paying stocks is due to the compounding effect over a large period of time. See for instance,...

I don't know if crimes were committed or not. Maybe its possible that people with a good education and making good salaries are really, really dumb. Or maybe, they know how to produce the answer management is looking for. It is unlikely that any individual will be held to account for as we all know ...

You have asked an excellent question. The statement that a return is an "annual return" does not explain how the return was generated. It may in fact be the result of daily compounding or no compounding. If you are to understand the return in order to compare it to other investments or to ...

Thanks for your comments as I think that sums things up. The Fed has said they will keep interest rates low until the economy improves. So stocks it is unless one of those pesky Black Swans arrives. What we need is some type of radar that can detect an approaching Black Swan.

In todays WSJ, there is an article (Investors See a Way Forward: Buybacks) discussing the continuation of BuyBack Programs in 2013 giving a lift to corporate earnings per share and thus stock prices. A buyback of 3% lifting earnings per sare by 5%-7% was suggested. Since much of the desirability of ...

Confusion certainly abounds. The Siegel return is a frictionless compounding model which athough interesting and useful does not really exist. Shiller is talking about a change in the S&P level due to earnings growth and any possible change in valuation (P/E). And the Gordon model ( and variatio...

For those interested in this topic there is a very good paper by Jay Ritter (http://bear.warrington.ufl.edu/ritter/JACF_2012.pdf) titled Is Economic Growth Good for Investors? in the Journal of Applied Corporate Finance. Looking at data from 1900 to 2011 for 19 countries there is a negative corellat...

For those investing for the long run and hoping to achive the Siegel return of about 7% real return, stock buybacks won't work. The Siegel return is achived by compounding dividends and growing your shares. Buybacks could be looked at as an anti-compounding program.

Thanks for the link. It is always good to hear the commom and good sense of Mr Bogle. It is probably a good idea to listen to him once a month in case your mind starts to go wobbly.

Nisiprius' advice is spot on. I believe the best way to find a job is--all of the above. I would suggest that you don't become locked in to one mode of job searching. And today for many that is to spend endless hours on the Internet. From time to time you shoud review how you are spending your job s...

I think the key phrase is " the next several years". You are fairly young and if you are investing for the long run, your bond fund is going to yield pretty much what it is currently yielding. If you think you will need to liquidate your investment " in the next several years", t...

"Our appointment with life is in the present moment."
Thich Nhat Hanh

And to be totally helpful, when the statement " includes dividends" is made it should be explained if this includes daily compounding of dividends with no taxes and no fees. Unfortunately, sometimes "includes dividends" means compounding is done and sometimes does not. It is left...

ssss, have you back tested that mix?

Azanon, You seem to be saying that because you observe a lot of casino players in the market, that they are the market. Yes, there are plenty of people in the market for the short run but there are also those who invest for the long run and they choose at time to buy stocks when their expected retur...

Rick Ferri has suggested that foreign earnings growth should be included in the earnings growth component of the Gordon Model. It is often stated that foreign earnings are "sequested" due to a repatriation tax. If this is the case, then perhaps foreign earnings can't be included in the ear...

TheEternalVortex says: "But our manufacturing output is much higher now than in 1960. Just looking at the number of workers is useless, what matter is how much you produce with your labor. The amount of hours we spent washing dishes was probably also much higher in 1960." Yes, productivity...

There is an excellent article in Sundays The New York Times (How US Lost out on IPhone Work) examining many of the items discussed above. Although the article is framed around the IPhone and Apple it is a very thorough analysis of the shrinkage of the manufacturing sector in the US economy. It also ...

Most important investing belief: That John Bogle gives very good advice.

Its hard to pick a favorite as there are many great Christmas songs. But its not hard to pick the worst--that Chipmonk song. There should be legislation banning it.

Among my favorites is Pretty Paper by Roy Orbison. The song always moves me.