• anonymous said on Jul 15, 2006....

  Dear eve1, I am not an expert on money matters, but here's what I believe. Say there's a business that is not growing any more, but expected to stay steady for many years. You buy stock in it, it gives you dividends. Then the dividend better be higher than what you can get from government bonds, because otherwise, what the heck, you should buy bonds (safer). So if government bonds give you 3 bucks a year (say) per hundred bucks, and your stock pays dividends of 3.50 per year for 100 bucks' worth of stock, you are doing okay. You get an extra 0.50 because you take a risk with the stock that you don't take when you buy bonds. But suppose another company is growing, so its earnings are growing. Say its earnings are expected to double every 5 years. But it is ploughing all its earnings back into the business, to achieve this growth, so it's not paying you any dividends right now. But, because the company itself (with the money ploughed back in) is becoming more valuable each year, your share in it is more valuable each year. All of this is because of the promise of future dividends; and the expectation that more people will be more willing to pay more dollars for a share of this company. There's human emotion involved, and in large numbers emotions are unreliable -- fads, crazes, booms and busts. So over a year, or even 3-4 years, things may not work out too well. But in the long run, people believe they should, and rapidly growing companies (whose growth is not expected to saturate soon) are good things to buy stock in. After some experiments of my own, I now think that for individuals who have low expertise or not enough time to really follow the market, it is probably a good idea to select a growth oriented mutual fund with low fees (they charge a percentage of your money each year). In developed economies like in the US, you may be well off even with Index funds, which are directly tied to whatever index (NASDAQ ..?)you like. In less mature economies, growth funds can significantly outperform the market. Good luck.

• eve1 said on Aug 04, 2006....

  Thanks for the advise!

• investing_genious said on Sep 20, 2006....

  Hello eye1 and annonymous
  Please find my article on HIGH DIVIDEND YIELD STOCKS
  and get a new insight.
  If you like the post just say few words
  here it is:
  www.soulcast.com/investing_genious
  
  thanks
  

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