Hi Reader,
I'm writing this while trying to finish my next Youtube video, and my brain currently feels like an Excel spreadsheet with too many tabs open. And going to sleep after midnight for the past week certainly hasn't helped (yes, we finally finished our rennovation🙌)
So this week's email is short.
My lastet video is about something that sounds simple, but annoys a lot of investors:
Dividends don't make you richer.
I know. Very offensive to say in Australia.
But I'm not anti-dividends. And I'm definitely not saying companies that pay dividends are all bad. The point is much simpler: A dividend is not magic money. Dividends are not bad. But they are simply not a wealth creation machine by themselves.
When a company pays you a dividend, the cash leaves the company and lands in your account. So instead of having $1000 in shaers, you now have $900 in shares + $100 in cash. You still have $1000. The value didn't apear out of nowhere.
From an investing point of view, if you cannot be sure that you'll use that cash better than the company would, there's an opportunity cost. That cash could potentially compound into more value in the future if it stayed inside the business.
Of course, you don't have to use every cent to invest. You can also use the cash to fund your lifestyle.
Well, this whole conversation is about to become even more important. Because Australia's new Budget may change the way investors think about income, capital gains, property, trusts, and even FIRE numbers.
I'm working on a deep-dive video to test all the numbers.
Some investors may be better off than they think. Some strategies may become less attractive. And a few 'classic' Australian wealth-building habits might need a second look.
I won’t spoil it here because I’m still buried in the numbers. The big question I’m trying to answer is: If the tax reward system changes, should your investing strategy change too? I will share what I would do with my investments in the next video.
For now, watch 👉 the Dividend Video here if you missed it, and reply to this email with one word: Dividends or Growth, I'm curious which camp you're in.
Talk soon,
Irene
P.S. Forward this to one friend who loves dividends a little too much. Gently.
