03-07-2014, 04:59 PM
(03-07-2014, 03:07 PM)Kerim Wrote:(03-07-2014, 01:26 PM)dividendventure Wrote: So, won't an index fund grow more per year than the average dividend stock (even including dividend re-investment)?
That really is the big question, and I think that you are right that there is not a clear-cut answer. As you hinted, depends on time frames, sectors, and whether income is important to you (either to spend or reinvest).
(03-07-2014, 01:41 PM)hendi_alex Wrote: I would also assume that smaller cap growth stocks would tend to out perform in that regard.
I think I recall reading that over the long haul small-cap indexes have outperformed broader indexes by a little bit. But that is not the same as individual stock-picking. I'd be wary of trying to predict small-cap winners and would probably stick with indexing there, for the most part.
(03-07-2014, 04:50 PM)hendi_alex Wrote: I agree, however small cap is not what most of us think of. A small cap index fund generally invests in companies with market cap of between a few hundred million up to 2 billion dollars. These are all companies with well established track records, though wome will have only recently gone public. Lots of us probably hold individual tickers of companies in that size range, and we don't consider them to be particularly high risk investments.
This is very true, it is part of the reason why I always try to look for small-cap (Between 1 and 2 Billion market cap) that have a good balance sheet, earnings growth and consistent dividend payments and increases around 10 years. Of course these companies are very hard to find, as they have such a potential upside. Since I am based in London, UK stocks are fair game for me, so I've been able to find bargains there. Looking at US listed stocks, I can't seem to find such good small-caps.
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