➜ Watch next:    • Hold cash until THIS happens  
In this video I’m going to show you how to chop off years of extra time and retire from your investments way faster by avoiding dividend stocks.

There are two reasons why avoiding dividend stocks will let you retire years earlier that we’re going to be covering in this video.

The first is the tax drag effect.

If you earn 10% annual returns for 40 years and if 6% of that 10% is in the form of dividends, after 40 years you’ll have significantly less than if none of your returns were in the form of dividends, because of the tax drag.

If all of your 10% gains were in the form of market value appreciation on the other hand, your investment account would actually be 37% higher, after 40 years.

Now to understand the second reason: Imagine you’re the owner of a risk-free 10% perpetual bond. But this bond has a special feature:

You can (1) either take your 10% in cash, or you can (2) choose to reinvest your 10% into more 10% bonds with the same cash-or-reinvest option.

Now… if, in any year the risk-free bond rate is 5% it wouldn’t make any sense to take your 10% in cash because choosing more 10% bonds makes more sense.

If the risk-free bond rate available is 5%, your 10% risk-free bond will trade at a premium price.

So even if you needed cash to live off, you’d still be better off by selecting the option of receiving more 10% bonds and then immediately selling them, rather than taking the options of getting your 10% as cash.

If you take the bonds and immediately sell them you’ll be left with more cash in the end.

If in other years the risk-free bond rate available is 15%, it now wouldn’t make sense to take the bonds.

Why would you want more 10% risk-free bonds when 15% risk-free bonds are available.. So you would take the cash.

Even if you had no need for cash… you’d still take the cash… Because if what you wanted was more 10% risk-free bonds, then you could just take the cash and then immediately go and buy 10% bonds and you’d be able to buy them at a discounted price due to the fact that 15% risk-free bonds are currently available.

It works the same way with stocks!

If a company trades at 120% of book value, then every dollar retained turns into $1.20 of market value.

So even if you need cash to live, it would actually be better for you if the company retains the earnings, and then for you sell the appropriate number of shares as per your cash needs.

❤️ Support the Channel:    / @intelligentstockinvesting  
➡️ JOIN OUR MASTERMIND FACEBOOK GROUP:   / intelligentstockinvestors  

BEST INVESTING BOOKS
📚 The Little Book That Still Beats the Market
➜ https://amzn.to/3fkkscB
📚 The Outsiders
➜ https://amzn.to/3jeFcmW
📚 100 Baggers
➜ https://amzn.to/3A3Nt49
📚 The Complete Investor
➜ https://amzn.to/2V3Saw5
📚 Richer, Wiser, Happier
➜ https://amzn.to/3igSvUC
📚 The Dhandho Investor
➜ https://amzn.to/3ykf1l9
📚 Tao of Charlie Munger
➜ https://amzn.to/2V9FgMM
📚 The Complete Financial History of Berkshire
➜ https://amzn.to/3kRFRNp

🙋‍♂️ Watch Next to Keep Learning (YouTube Playlist):
➜    • How stocks work explained simply  
🛎 SUBSCRIBE (Click to subscribe):
➜    / @intelligentstockinvesting  

Special thanks to my incredibly beautiful, smart, and creative girlfriend, Stephanie, for her editing wizardry and creative insights and ideas. This isn't possible without you.

Disclaimer:
These youtube videos and content are for entertainment purposes only. If stocks or companies are mentioned, Richard may have an ownership interest in them -- DO NOT make buying or selling decisions based on Richard’s videos. All information contained herein should not be construed as anything other than an opinion for entertainment purposes only. Information being provided may be outdated or inaccurate; it is your responsibility to verify all information.
No financial advice is being given nor is any other advice of any kind. You should consult with a qualified professional where appropriate and before any action is taken on this video. No liability or damages shall take place because of this video and/or content.
There is no express or implied representations or warranty with respect to the accuracy or completeness of the content of the videos, including any content, description, links, or resources shared, including those by third parties. Furthermore, all parties specifically disclaim any and all express or implied warranties of merchantability or fitness for a particular purpose. By watching this and all related videos, you agree to be bound by this disclaimer.

#StockInvesting #StockMarketForBeginners #HowToInvest