12-04-2013, 05:54 PM
Nice posts, folks. These are exactly the questions I am wrestling with. I think cannew has it right from a spreadsheet perspective, but Tom's “edited to add” question is dead on, too.
Your "beans" point is a good one, Eric, and on point, but there is a variant with stocks, since with stocks you can take the fruit of the first bean plan and grow berries with it. To wit: If I take the dividends from XYZ and invest them in ABC, and then ABC pays dividends, are those subsequent ABC dividends part of the “return” on my initial investment in XYZ? I think most people would say no. But that would be no different than counting all dividends reinvested back into XYZ as part of the “return” on the original investment, which I think many dividend growth investors are comfortable with. To me those seem like inconsistent positions.
Maybe the right thing to do is simply sum the dividends paid from each position as part of the “return.”
Or maybe I am overthinking this and should join NilesMike at the 10,000 foot level. Perhaps it is enough to keep score by tracking the overall portfolio value and the amount of income it produces. If they are increasing at a good clip (especially the latter), you’re on the right path.
Your "beans" point is a good one, Eric, and on point, but there is a variant with stocks, since with stocks you can take the fruit of the first bean plan and grow berries with it. To wit: If I take the dividends from XYZ and invest them in ABC, and then ABC pays dividends, are those subsequent ABC dividends part of the “return” on my initial investment in XYZ? I think most people would say no. But that would be no different than counting all dividends reinvested back into XYZ as part of the “return” on the original investment, which I think many dividend growth investors are comfortable with. To me those seem like inconsistent positions.
Maybe the right thing to do is simply sum the dividends paid from each position as part of the “return.”
Or maybe I am overthinking this and should join NilesMike at the 10,000 foot level. Perhaps it is enough to keep score by tracking the overall portfolio value and the amount of income it produces. If they are increasing at a good clip (especially the latter), you’re on the right path.