Why I LOVE Dividends and Can’t Stand Index Annuities (2018)

The TSP C Fund is a very low cost S&P 500 index fund.

The S&P 500 index is essentially the largest 500 publicly traded companies in the United States.

Largest means market capitalization. Does not mean revenue, sales, number of employees or anything like that. Simply means you take the number of shares outstanding times that by the current share price and VOILA, that is your market capitalization.

The 500 largest market capitalization stocks in the US are in the SP 500.

So, now that you know what the C Fund is how do you incorporate it into YOUR portfolio?

Well, in my opinion, the C Fund should be the foundation of ALL portfolios where the investor won’t need the money for 5 years or more.

If you can withstand some serious market chaos, and by serious I mean a 50% decline like we saw from Oct 2007 to Mar 2009, a 25% decline every 4 years or so and on average a 14% decline EACH YEAR, you could make a lot of money in the C Fund.

In fact, since inception the C Fund has averaged 10.53% a year. That means you’ve doubled your money every 7 years. Put $100k in there in 1988 and that is worth $2 million now.

Put $100k in there in 1988 and have added $5k a year and you’re worth $3 million today!

That’s a lot of money. But how many people actually did that? Not many. Why? Because the markets go up….and then they go down.

WHen they go down people get real nervous and bail. Can’t do that.

So before you buy into the C Fund you’ve got to make a deal with yourself that you will not touch the money for 5 years. If you can convince yourself to stay pat for 5 years running. You’re probably going to do okay.

No guarantees of course. But what are the alternatives? A Bond Fund paying 2.85% and that’s BEFORE taxes and inflation… YIKES!

Dividends historically have accounted for nearly 40% of a portfolio value’s growth.

Even with the low dividend yields today, dividends still play a HUGE role in growing the net worth for investors.

In this video I show you exactly how dividends improved the performance of the Vanguard S&P 500 fund (VFINX) by 50% from 2003 until March 2018.

I compare the PRICE ONLY performance of the VFINX to the price + dividend performance.

Price only performance increased an initial $100k investment to $297k. Yet, dividend reinvestment increased that $100k to $406k at then end of those 15 years time.

Don’t forget this is in a low dividend yield environment too. In fact, after 2008 many of the higher dividend paying companies, banks come to mind, STOPPED even paying dividends.

Yet, the numbers speak for themselves; Dividends added 50% more growth than just price.

The interesting thing is that if you look at index annuities, they don’t use dividends in the returns investors get! Add on the hefty fees and it’s next to impossible for an investor to get anywhere near a market like return. Just can’t happen.

No dividends PLUS high fees = VAST under performance. Which is why I recommend staying away from these types of “investments”.

If you want “safety” there are better alternatives.

If you want “growth” there are better alternatives.

If you want a combination of some safety and some growth there are better alternatives. In future video’s I’ll discuss the alternatives.

But for now, just watch this video and allow me to show you EXACTLY how dividends are just so important to your financial well-being.

© Copyright 2018 Heritage Wealth Planning