The beauty of dividends

Hermann Stern analyses his first season stock portfolio and is pleased with the dividends he received.

If I look at my portfolio from my first year of investment, I am pleased that I have already accumulated 2,894 francs in new cash. What do I have to thank for this joyous surprise? Very simple: dividends.

Dividends are often overlooked when they are issued. Look at the Japanese stock index and you will see it is at a lower level than twenty years ago. The fact that you have received dividends every year and can buy stocks at relatively cheap prices is often forgotten.

Often, one comes to the conclusion that investing in stocks is a risk. But, you would be wrong.

A better way of looking at stock investment is to simply compare what you originally paid compared to its value today. We can do this for any stock with a Google spreadsheet, which shows just the ranks of the individual shares.

You can also use it for your own portfolio and it’s free! Here the Google Spreadsheet Template.

Before I start investing a new portfolio, I first look at my old portfolios to see if there is anything else to be done there. This would be the case when stocks are suddenly very low or if diversification is no longer assured because a stock suddenly has become more expensive.

In my first year’s portfolio, diversification is guaranteed. Regarding the ranks, most stocks are in the green sector. Only just RWE has a very low value rank. I decide against selling, because I want to save money and saving money is about investing, not selling.

Should I invest my 2,894 francs of dividends? It may be too early for me because I just bought 5'000 francs worth of other shares. So, I will wait until more dividends have accumulated. Why create more work when it is not necessary? Stock investing takes little time, if you only do what you need.

Hermann Stern’s first season stock portfolio

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